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 independent adviser when setting up an executive income protection policy.