What is Executive Income Protection?

Many of us insure many things including our pets, cars, homes and mobile phones. Without our monthly income most of us wouldn’t be able to pay for any of these! An executive income protection policy is arranged to cover a key member of staff and can be used to provide an income replacement in the event of them being unable to work due to sickness or injury.

The policy is arranged on a ‘life of another’ basis meaning that it is owned by the company and therefore can be paid as a business expense.

When a claim is made, the benefit is paid directly to the business which may use the money to provide an employee or director with a replacement of any lost pay due to being off with sickness or injury.  The business would then pay the benefit to the employee through the normal methods and therefore being taxed under PAYE at this point along with the relevant National Insurance Contributions.

Upon application you must choose a deferred period. This is the length of time between the life assured becoming incapacitated and the benefit amount kicking in.

There are many variables in policy types and requirements so it is important to obtain advice from an expert adviser when setting up an executive income protection policy.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.


Are there limits on the monthly income payable?

Executive income protection policies can payout a replacement of up to 75% of an employee’s gross taxable earnings. This can include dividends, P11D benefits and any pay related to the employee’s performance within the business.

How are claims assessed?

Should the life covered become unable to do their job due to sickness or injury the monthly benefit becomes payable after the deferred period has passed. The insurance company will stop paying the benefit once the life assured goes back to work.

An Income Protection plan with the ‘own occupation’ definition of incapacity pays out if you suffer sickness or injury which prevents you from working in your current job role. Unlike some cover, a policy with an ‘own occupation’ definition of incapacity will simply payout, rather than requiring you to do an alternative job of which you are capable.

There are options of ‘suited occupation’ or ‘any occupation’ but the cover offered is not as comprehensive and therefore own occupation is usually recommended.

When will monthly policy benefits end?

If you choose a full income protection policy with an unlimited claim period, it will be when the policy term ends (typically retirement age). Alternatively there are cheaper options which offer a maximum claim period of 2 years or 5 years per individual condition.

It will also stop if you leave employment of the company or of course if you return to work.

What if I am off work and the company stops trading?

If you are claiming at the time that the company stops trading then the insurer will usually continue to pay the income. If you are not claiming then the policy will cease.

Why not call us now for expert advice?

Call 0800 644 4468Mobiles call01737 336 990