Group income protection costs

Find out what affects the cost of group income protection.

Published: 15 Dec 2025

Key points

The cost of group income protection is made up of lots of different factors.
Some of these are set by you, the employer, and some are determined by the type of workforce you have.
You can offer a core level of cover, and your employees can sometimes increase this by paying a higher premium each month.

It’s often thought that additional workplace benefits like group income protection are expensive for both you and your employees. However, most providers put you in the driving seat and allow you to set certain factors to manage the cost of your policy. In this article, we’ve broken down what makes up the cost of a group income protection policy.

How is the cost of group income protection worked out?

The cost to you, the employer is usually 0.25% to 1.5% of your employees gross salary. But there are lots of factors taken into consideration when working out the cost of your group income protection. Some of these are set by you, and some are dependent on how your workforce is made up.

1. The way you design your cover

You can design your group income protection policy to suit your budget.

Level of cover

This is where you choose how much money your employees will be paid if they make a claim. This is usually between 50% and 75% of their salary.

Deferred period

Group income protection policies usually have a period between an employee making a claim and when their payments can start. Deferred period lengths can range from anything between 8 weeks to 52 weeks.

Benefit payment length

This is how long your employees will receive their payments for. This can be two years, five years or even up to retirement.

Indexation

This is used to adjust the values of products in line with inflation. For a group income protection policy, you can choose whether the benefits increase with inflation or whether they stay the same.

2. The demographics of your workforce

The mix of your employees, as well as the industry and occupation you work in all affect the cost of your policy.

Age

Older employees typically have higher premiums, as they could be more likely to be off work due to ill health.

Salary

Higher salaries equal higher payouts, so premiums will usually reflect this.

Gender

The gender mix of your workforce could impact the cost of group income protection, depending on the provider.

Industry

Industries like construction, engineering and the emergency services are all seen as riskier to work in by insurers.

Occupation

Office-based and service workers – such as retail and hospitality – are generally seen as low risk, so their premiums tend to be lower.

3. The size of your scheme

If you have a larger company, then you might benefit from economies of scale with your group income protection policy. But if you have a smaller group to cover, then you might have higher costs per employee.

4. Claims history

The premiums might increase if there are claims made against your group income protection policy. On the other hand, you could also get discounts on future premiums if there aren’t any claims made.

5. Additional benefits

Depending on your provider, they might offer you additional benefits – things like rehabilitation support and employee assistance programmes. These usually come at no additional cost, so it’s worth considering which ones work best for your business.

What are the different types of cover?

Most group income protection policies are funded by you, the employer, and form part of your employment contract.

There are certain providers, like Aviva, that offer flexible benefit policies too. With these types of group income protection policies, there’s always a core level of cover that you pay for. Your employees then have the option to up their cover – so you might provide a limited payment term of two years, and they extend this to retirement age. This extra cover is paid for by your employee.

How can I manage the cost of group income protection?

To lower the cost of your policy, you can change the level of cover provided or increase the length of your deferred period. We also recommend reviewing your cover regularly to make sure you’re not overpaying on your policy. Sometimes employers find that improving and promoting wellbeing can reduce certain claims made against group income protection policies. The more claims are made, the higher your future premiums are likely to be.