94% haven’t checked their workplace sickness benefits. Are they enough to protect your finances?

If your employer offers income protection and critical illness cover as a benefit of employment, you might assume your protection needs are covered.

However, whilst these schemes can provide a basic financial safety net, they may not be tailored to your specific needs and circumstances.

As such, it’s important to carefully review your company-provided cover before deciding whether to take out personal cover. Yet, according to research by the HomeOwners Alliance, 94% of homeowners haven’t checked their employee benefit coverage at all.

Read on to explore why your workplace benefits might not be enough to protect your finances and key details to assess when reviewing your cover.

Income protection and critical illness cover offer different protections

The most common types of sickness protection offered as workplace benefits are income protection and critical illness cover. Whilst these can both cover you in the event of illness, they provide different protections:

• Income protection: Replaces a portion of your lost income via monthly payouts in the event that you become unable to work due to illness or injury.
• Critical illness cover: Pays out a one-off lump sum if you’re diagnosed with a condition listed in the policy, regardless of whether you continue working.

If your employer provides group cover as a benefit of employment, you might choose to supplement your protection with personal cover.

Find out more: What would happen to your finances if you couldn’t work? Here’s how to plan ahead

Your cover amount could be lower than on a personal policy

You may find that group income protection provided by your employer offers a lower level of cover than would be available through a personal policy.

You will usually be covered for a percentage of your base salary. So, if you receive a portion of your income as bonuses, commissions, or dividends, your payout could be substantially lower than your usual earnings.

Similarly, group critical illness cover is typically either a fixed sum or a percentage of your base salary, excluding bonuses and other earnings.

Payouts for both types of cover may also be capped. For higher earners, this could mean your cover falls short of your financial needs.

As such, you might consider taking out additional cover to make up the difference between your workplace policy and your financial needs. PenLife’s Protection Specialist can support you in evaluating your existing coverage, determining how much you would likely need if you became unable to work, and identifying a suitable plan to bring your coverage up to the required level.

Find out more about our protection and insurance services

Your payouts could be taxed when made via your employer

Payouts from personal income protection are usually tax-free.

But if your premiums are paid by your employer on your behalf, income protection payouts may be classed as taxable income. They will usually be made through your usual payroll and potentially subject to both Income Tax and National Insurance.

So, it’s important to check whether your payouts are liable for tax, and at what level, when ascertaining whether your workplace protection is sufficient for your needs. Otherwise, should you need to make a claim, you may find you receive less than you expected.

Critical illness cover payouts are typically tax-free, regardless of whether you or your employer pays the premiums.

Your payout duration could be capped under a workplace policy

If you take out personal income protection, you can choose to have monthly payments end after a defined period or continue until you either return to work or retire.

Group income protection provided as an employee benefit often limits payouts to between two and five years. So, if you’re unable to work due to illness or injury for a longer period, you could be left without an income once your payout period ends.

Additionally, there is usually a waiting period before your cover kicks in, which can be between 30 days and two years. It’s important to check how long you could have to wait for payouts to start and whether you would be able to cover your expenses until then.

Remember to check your company’s sickness policy. Statutory Sick Pay (SSP) is up to £123.25 a week in 2026/27, but some employers may offer full or partial pay for several weeks or months.

You may have limited or no control over your workplace policy

There are numerous options for income protection and critical illness cover. When you take out your own protection, you usually have a choice of coverage levels, waiting period, and additional benefits.

When cover is provided as a workplace benefit, you typically get very little – if any – say in your policy details. As such, your cover won’t be tailored to your specific needs, circumstances, and priorities.

What’s more, you likely have no control over changes to your cover. Your employer may amend the policy, or even cancel it completely, as they see fit. If you leave the company, your cover will end.

Of course, you could take out your own protection when your workplace cover ends. However, it’s important to consider that pre-existing medical conditions are often excluded – if they are covered, premiums may be higher. So, if you suffer a health problem before taking out personal cover, it could be more difficult to find suitable protection.

Seven details to check when evaluating your workplace cover

It’s important to carefully evaluate your existing cover and consider whether it’s worth taking out further protection. Here are a few policy details you might wish to review:

1. Coverage amount: How much will you receive if your claim is successful?
2. Claims criteria: Which illnesses and circumstances are you covered for?
3. Waiting period: How long will you have to wait before receiving a payment?
4. Payout duration: For income protection, how long can you continuously receive payments for?
5. Tax liability: Will your payouts be taxed?
6. Family protection: Is your family/partner covered, or just you?
7. Own occupation: For income protection, will the policy pay out if you can’t do your own job, without requiring you to take up alternative work?

In some cases, you might find that your company-funded protection is sufficient. In others, you might identify a gap between your cover and your financial needs. But by conducting a detailed review, you can help ensure you have the financial safety net you’d need if you became unwell.

Get in touch

Our Protection Specialist can support you in evaluating your current cover, working closely with our Financial Planners to determine the ideal level of protection for your needs.

Email us at enquiries@pen-life.co.uk or call 01904 661140.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Note that life insurance and financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.