They solve different halves of the same problem. Private medical insurance (average ~£57 per employee/month) shortens absence by getting people diagnosed and treated in weeks, not months. Group income protection (typically 0.25–1% of payroll) replaces 50–75% of salary when illness keeps someone off long-term anyway. Most employers who can only fund one start with PMI; GIP covers the tail risk.
- ✓PMI attacks waiting: consultation in days vs the NHS median of 12.4 weeks.
- ✓GIP attacks income loss: 50–75% of salary paid when absence runs long anyway.
- ✓PMI averages ~£57/employee/month; GIP typically costs 0.25–1% of payroll.
Two products, two different jobs
Private medical insurance (PMI) and group income protection (GIP) are easy to file under one heading — 'health benefits' — but they answer different questions. PMI answers: how quickly can we get this person diagnosed and treated? With the NHS median wait at 12.4 weeks and 1 in 12 patients waiting 38.6+ weeks, private cover turns months of limbo into a consultation within days, diagnostics in one to two weeks and routine surgery in two to six weeks.
GIP answers a grimmer question: what happens to this person's salary if they can't come back for a year? Some conditions — severe mental illness, aggressive cancers, complex injuries — don't yield to a fast operation. When absence is long no matter how good the care, GIP replaces 50–75% of salary, typically after a 13–26 week deferred period, and brings rehabilitation support with it.
What each one costs
The pricing models are different shapes, which makes comparison awkward — PMI is priced per head, GIP as a percentage of covered payroll. Here's how they land for a ten-person team on an average salary of £35,000 (£350,000 payroll).
| Private medical insurance | Group income protection | |
|---|---|---|
| Pricing basis | Per employee: £35–£110/month, avg ~£57 | Payroll %: typically 0.25–1% |
| Ten-person team, indicative annual cost | ~£6,800 (at ~£57/head) | ~£875–£3,500 |
| What a claim delivers | Private consultations, diagnostics, surgery | 50–75% of salary, paid monthly |
| Employee tax | Benefit in kind (P11D) | Generally no BIK; benefit taxed via PAYE if paid |
| Claim frequency | Common, smaller amounts | Rare, potentially very large amounts |
Note the pattern: GIP is usually the cheaper line item, because it insures a rarer event. PMI costs more because it gets used more — which is also why employees notice and value it more day to day. Both premiums are generally allowable business expenses for corporation tax; see our tax guide for the detail.
A decision framework by workforce
If the budget only stretches to one product this year, let the shape of your workforce and your risk tolerance decide.
- Small team where every person is critical (2–15 people). Start with PMI. Your biggest operational risk is a key person stuck on a waiting list for months with something fixable; PMI directly attacks that. It's also the benefit candidates ask about.
- Knowledge business with high salaries. Prioritise GIP sooner than most. Six-figure salaries make self-funding long absence brutal, and mental ill health — 41% of long-term absence — is a leading claim cause that PMI only partially addresses.
- Manual or physical workforce. Lean GIP. Injuries and musculoskeletal conditions create exactly the long absences GIP covers, and its rehab services are built for them. Pair with a cash plan for everyday physio.
- Recruitment-driven decision. PMI wins. Health insurance is the most-valued voluntary benefit; income protection, for all its worth, rarely swings a job offer.
- Duty-of-care-driven decision. GIP wins. Nothing else in the benefits toolkit stops a seriously ill employee's household income collapsing to statutory sick pay at roughly £120 a week.
Price both for your team
The both-eventually ladder
Most benefits packages aren't built in one go — they're built in rungs as headcount and budget grow. A typical sequence for a UK company looks like this:
- Group life insurance first. At roughly 0.2–0.5% of payroll, death in service is so cheap it rarely needs to wait.
- PMI for the team. The most-felt, most-asked-about benefit; from ~£57/head on average, often starting with a core cover level and building up.
- GIP with a 26-week deferred period. Add the long-absence safety net once PMI is in place, aligning the deferred period with your sick pay policy to keep premiums down.
- Upgrades and extras. Richer outpatient limits on the PMI, a cash plan for everyday costs, dental — in whatever order your team actually asks for.
Companies that buy in this order usually spend around 1.5–3% of payroll on the full insured stack — less than a single unplanned long-term absence can cost in cover, overtime and recruitment. The ladder isn't a rule: a firm whose founders are its only irreplaceable people might buy director-level PMI first and add group benefits as it hires, while a business in a physically demanding trade might put GIP on the first rung. The point is sequence deliberately, rather than buying whichever product a salesperson mentioned first.
How the two interact when someone gets ill
The strongest argument for eventually holding both is how neatly they hand over to each other. An employee develops a knee problem: PMI gets them a consultation within days, an MRI inside two weeks and surgery inside six — absence over before GIP's deferred period even ends, and no claim needed. A different employee is diagnosed with a serious illness needing a year of treatment: PMI funds fast, comfortable care while GIP steps in at week 26 to protect their salary for the duration, with the insurer's rehab team planning the eventual return.
Frequently asked questions
Should a company buy health insurance or group income protection first?
For most small companies, health insurance first: it's the benefit employees value and ask about, and it directly shortens absence in a way staff feel. Buy group income protection soon after — it's usually the cheaper line item and covers the long-absence risk PMI can't. High-salary or manual workforces may reasonably reverse the order.
What's the cost difference between PMI and group income protection?
PMI is priced per head — £35–£110 per employee/month, averaging ~£57. GIP is priced as a percentage of covered payroll, typically 0.25–1%. For a ten-person, £350,000-payroll team that's roughly £6,800/year for PMI versus £875–£3,500 for GIP, so GIP is usually the smaller bill.
Does private medical insurance replace lost salary like income protection does?
No. PMI pays hospitals and specialists for treatment; it never pays the employee's wages. If an illness keeps someone off work for a year, PMI may have funded excellent care, but their income still falls to sick pay unless group income protection (or generous company sick pay) is in place.
Does group income protection get employees treated faster like PMI?
No. GIP replaces salary and funds rehabilitation support, but it doesn't buy private consultations, diagnostics or surgery. An employee with only GIP still faces NHS waits — currently a 12.4-week median, with 1 in 12 waiting 38.6+ weeks. Shortening treatment time is specifically PMI's job.
Can a small business afford both PMI and group income protection?
Often, yes — the combination typically lands around 1.5–3% of payroll including group life. A five-person team might pay roughly £3,400/year for average PMI plus £500–£2,000 for GIP. Trimming PMI options (higher excess, capped outpatient cover) and using a 26-week GIP deferred period brings both within reach.
How do PMI and group income protection work together in one absence?
PMI acts first: fast diagnosis and treatment, aiming to end the absence before GIP's deferred period (typically 13–26 weeks) expires. If the illness is serious enough that absence continues anyway, GIP takes over the salary at 50–75% while its rehab team manages the return to work. They hand over rather than overlap.
Is group income protection cheaper than health insurance per employee?
Usually. At 0.25–1% of payroll, GIP on a £35,000 salary works out at roughly £7–£29 per employee per month, versus ~£57/month average for PMI. The gap reflects claim frequency: many employees use PMI in a given year, while long-term GIP claims are rare but individually large.
Which is better for staff retention: health insurance or income protection?
Health insurance, measurably — it's consistently rated the most-valued voluntary benefit and gets used visibly throughout the year. Group income protection is the more protective product in a crisis, but its value is invisible until claimed. Employers optimising purely for recruitment and retention typically lead with PMI.
Do PMI and group income protection have the same tax treatment?
No. Both premiums are generally corporation-tax deductible, but PMI is a taxable benefit in kind for employees (P11D, with 15% Class 1A NIC for the employer), while employer-paid GIP normally isn't — employees are only taxed if a claim is paid, via PAYE on the benefit. Confirm specifics with your accountant.
What happens without either PMI or group income protection?
Employees rely on the NHS — median wait 12.4 weeks, 1 in 4 diagnostics taking 6+ weeks — and on statutory sick pay of roughly £120 a week, which ends after 28 weeks. The employer absorbs the absence cost and any discretionary sick pay from cash flow, with no rehab support on either side.