What is executive income protection?

Executive income protection is a business income protection policy, ideal for small to medium sized businesses.

It can help to ease financial strain for an employee if they’re unable to work due to illness or injury (this can include employed directors of their own limited company).

It does this by making monthly payments to the business, which can then be passed onto the employee (via PAYE) to help them cover living expenses.

As well as covering a salary, it’s also possible to protect the following with an executive income protection policy:

  • Dividends
  • Dividends paid to a spouse
  • Employer national insurance contributions
  • Employer pension contributions

Why not compare executive income protection through Reassured?

A friendly member of the team can help you compare quotes from a panel of top UK providers.

Quotes are fee-free, personalised and no-obligation. Simply get in touch.

How does executive income protection work?

Executive income protection works in a similar way to a standard income protection policy, by paying out to replace lost income.

However, instead of being taken out by an individual to protect their income, the policy will be arranged and paid for by a business.

If you’re an employed director of a limited company, you could choose to protect your own income or allow an employee to benefit themselves.

If the insured person becomes unable to work (due to illness or injury), a claim can be made and payments will be made to the business.

The funds can then be passed on to the insured person, using PAYE, to provide them with a percentage of their income while they’re unable to work (acting as a form of sick pay).

Typically, up to 80% of the insured person’s income can be protected.

As with any income protection policy, there are some key policy terms and conditions that you should be aware of:

Singles protection

Benefit amount

  • How much is paid out
  • Up to 80% of the insured person’s income could be paid out
Definition of Incapacity

Definition of incapacity

  • What makes you eligible to make a claim
  • Most policies come with an ‘own occupation’ definition
Policy Term

Policy term

  • How long cover lasts for
  • Cover often must cease by the insured person’s 70th birthday
Deferred Period clock

Deferred period

  • The time that must pass before payments commence
  • Typical deferred periods are from 4 - 52 weeks
Payment Period

Payment period

  • How long payments last for
  • You can opt for full term or limited payment period
Premium Type

Premium type

  • How you pay for cover
  • Premiums can be guaranteed, reviewable or age-banded

Reassured can guide you through each step of the application process and answer any questions you may have along the way. Why not contact us today?

What does executive income protection cover?

Executive income protection can help cover up to 80% of an employee’s income if they’re unable to work due to illness or injury.

This can help them to cover essential financial commitments and daily living costs, such as:

Re payment mortgage house

Mortgage payments

Cover rent cost

Rent payments

Family living

Family living costs

Bills utilities

Household bills

Childcare cost baby

Childcare

Debts

Debt/loan payments

With an executive income protection policy, as well as protecting a salary, it’s also possible to protect:

  • Employer national insurance contributions
  • Employer pension contributions
  • Dividends
  • Dividends paid to a spouse

For more information about what executive income protection, why not contact Reassured?

An expert member of the team can provide you with all the information you need to know.

How much income protection insurance do you need?

Enter the fields which apply to you to calculate the level of income protection cover you might require to help cover key costs.

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£723 a month is the average monthly mortgage payment in the UK, with the average monthly rental price coming in at £700.

The majority of our monthly income will go towards rental or mortgage payments.

For this reason, it’s essential to have precautions in place to ensure you could keep up to date with your payments if you weren’t receiving your usual income.

Monthly income protection payments can help to cover this large expense and ensure you can stay in your home.

£
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According to the Money Advice Service, the average household spends £340 a month on household bills.

This includes electricity, gas, TV and broadband.

£
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Childcare costs are on the rise with it now costing £137.69 per week for part-time nursery for a child under the age of two.

That’s over £550 per month - is this an amount you’d be able to keep up with if you were unable to work?

Becoming ill could also result in the need for additional childcare while you attend doctors’ appointments or medical treatment.

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The average household in the UK spends around £97 a week on their food shop, totaling £388 a month.

While this may seem like a small amount in comparison to some of the other expenses mentioned, the food shop is often where we try to scrimp and save when we fall on hard times.

Income protection can take care of the cost of your weekly food shop, as well as many other essential costs.

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At the beginning of 2020, credit card debt in the UK was at £2.1 billion, with almost 27 million UK residents in some kind of debt.

Becoming unable to work could make it hard to keep up with credit card or loan payments (including car finance or other financed goods).

Failure to keep up with payments could result in additional interest being incurred or late fees issues - resulting in a higher total needing to be paid.

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The average spent on public transport each month comes to an average of £94.

This includes the cost of public transport, as well as petrol and diesel vehicles.

While this amount may reduce while you’re unable to work as you won’t need to commute there may be additional spending on public transportation if your illness or injury leaves you unable to drive.

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Your total cover estimate

£ 0

Let us find you our best quotes.

What is the difference between executive income protection and personal income protection?

The main difference between the two is that one can be taken out by a business and the other is for individuals.

Executive income protection will be taken out and paid for by a limited company, allowing an employee to benefit from the monthly payments.

Any employee of the limited company could benefit from executive income protection, including employed directors.

However, both policies are similar as they can pay out to replace lost income due to illness or injury.

Executive income protection with reassured

Executive income protection:

  • Available to limited companies (to protect an employee, including employed company directors)
  • Up to 80% of the insured person’s income can be paid out
  • This can also include employer pension contributions, dividends and employer national insurance contributions
  • Payments will be made monthly until the insured person returns to work, the payment period comes to an end or until the policy expires
  • Payments will be made to the business and passed onto the insured person using PAYE
  • Payments can be tax deductible for the business
  • Available through Reassured
Personal income protection

Personal income protection:

  • Available to individuals (can cover the policyholder’s own income)
  • Could pay out up to 70% of the policyholder’s usual income
  • Payments will be made monthly until the policyholder returns to work, until the payment period comes to an end or until the policy expires
  • Payments will be made directly to the policyholder
  • Can be used to help cover essential financial commitments such as rent/mortgage payments, household bills, weekly food shop, childcare, transportation etc
  • Payments are tax-free
  • Available through Reassured

Simply get in touch to find the right policy to meet your needs. All quotes are personalised, fee-free and completely no-obligation.

Do I need executive income protection?

Small to medium sized businesses may not qualify for larger group protection schemes, or it may be unaffordable to have this type of benefit in place.

Without the right protection, employees may need to rely on their own savings or government benefits to get by.

Executive income protection can provide an affordable and tax-efficient way to offer financial protection to an employee (including directors of their own limited company).

As the premiums are paid for by the business, they can often be classed as a business expense, making them tax deductible for the business.

To determine whether executive income protection is right for you, why not contact Reassured?

Executive income protection providers

Executive income protection is available through many of the UK’s top providers.

Reassured can help you to compare quotes from leading providers, including:

Legal & General executive income protection

The policy will be set up on a ‘life of another’ basis as the payments will be made to the business and passed onto the insured person via PAYE.

The insured person must be a UK resident and employee of a UK based business (including an employed director).

A UK business can be a limited company or a limited liability partnership.

  • Cover can be level or increasing
  • Up to 80% of the insured person’s income can be protected (up to a maximum of £25,000 per month or £300,000 per year for level cover or £14,000 per month or £168,000 per year for increasing cover)
  • Policy must end before the insured person’s 70th birthday (65th for driving occupations and 50th for fitness instructors/dance teachers)
  • Own occupation definition of incapacity (a claim can be made if the insured person is unable to do their specific job)
  • Waiting periods include 4, 8, 13, 26 and 52 weeks
  • Policy premiums are tax deductible for the business but can be subject to income tax and national insurance for the insured person
  • Full and limited payment periods available
  • Additional benefits included such as guaranteed insurability, stepped benefit, rehabilitation benefit, linked claims, plus many more

LV= executive income protection

The policy will be set up on a life of another basis as the payments will be made to the business and passed onto the insured person via PAYE.

The insured person must be an employee of a UK based business earning a taxable UK income (this includes directors of their own limited company).

  • Cover can be level or inflation-linked
  • Up to 80% of the insured person’s income can be protected (up to £25,000 per month or £300,000 per year for level cover or £18,750 per month or £225,000 for inflation linked cover)
  • Cover is available to those aged 17 - 59
  • Policy term can a minimum of 5 years and must end by age 70
  • Own occupation definition of incapacity
  • Deferred periods include 1, 2 ,3, 6 or 12 months
  • Policy premiums are tax deductible for the business but can be subject to income tax and national insurance for the insured person
  • Full and budget executive income protection options available
  • Additional benefits included such as guaranteed insurability, LV= business care, LV= doctors services, back to work support, plus many more

Aegon executive income protection

The policy will be set up on a life of another basis as the payments will be made to the business and passed onto the insured person via PAYE.

The insured person must be a UK resident and an employee of a UK based business (including directors of their own limited company).

  • Up to 80% of the insured person’s income can be protected (up to a maximum of £150,000 per year)
  • Cover is available to those aged 18 - 59
  • Policy term can be 5 - 51 years (must end by age 70)
  • Own occupation definition of incapacity
  • Deferred periods include 4, 8, 13, 26 or 52 weeks
  • Policy premiums are tax deductible for the business
  • Full term or limited (up to two years) payment periods are available
  • Additional benefits included such as rehabilitation benefit, linked claims waiver of premiums, Policy Plus, plus many more

This information has been taken from each providers website and is correct as of 16/05/2023

Simply get in touch to compare executive income protection policies. All quotes are personalised, fee-free and no-obligation.

What are the benefits of executive income protection?

Executive income protection can offer a range of benefits. Including:

  • Can allow a business to provide financial protection to an employee (including employed directors) if the business is too small to be part of larger group protection schemes
  • If a director chooses to cover their own income, it reduces the need to dip into their own savings or rely on government benefits to keep up with their financial commitments while they’re unable to work
  • Allowing an employee to benefit from executive income payments could help them to feel more valued, as they’ll be provided with financial protection
  • It can also be possible to protect any dividends, employer national insurance contributions and pension contributions with executive income protection
  • As premiums are paid for by the business, they can often be treated as a business expense - allowing them to be tax deductible for the business

Executive income protection tax treatment

Executive income protection can be tax deductible for the business paying for the policy.

As the premiums are paid for by a business, they can be classed as a business expense.

However, as the funds are paid to an employee through PAYE, they can be subject to income tax and national insurance.

This is why the amount paid out is often higher than with personal income protection, to account for tax deductions.

Personal plans pay out a lesser percentage (up to 70%), but the payments are tax-free to the person receiving them.

Compare both executive income protection and personal income protection through Reassured to find the most suitable option to meet your needs. Simply get in touch.

Compare executive income protection quotes

Comparing quotes is essential in finding the best executive income protection policy.

By comparing executive income protection through Reassured they can find you their best quotes.

Policy terms and conditions can vary significantly between each provider, so comparing quotes can help you to find a policy that meet your needs at a great price.

Reassured can help you compare executive income protection quotes from a panel of the UK’s top providers, so why not get in touch?

All quotes through Reassured are personalised, fee-free and without obligation.

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