Executive Income Protection | Doesn’t need to be Complicated
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Key Person Life Insurance
How would your business cope with the loss of a key person? We help protect your business from the death of its key people.
Shareholder Protection Insurance
The death of illness of a minor or major shareholder can lead to massive business problems. Help give shareholder dependents a fair sale price of shares and help remaining shareholders retain the business shared with these important policies.
Business Loan Insurance
Many businesses borrow to grow or invest in expensive machinery or premises. On the death of a director banks often get worried and cancel overdrafts or call in loans. Business loan insurance protects your business from this issue.
Executive Income Protection Insurance
In the event of a long term or permanent illness where a director cannot work anymore then paying their wages can become a burden on the business. Executive income protection give the company the required funds to ensure the director can still be remunerated.
Relevant Life Policy
Key Person Income Protection Insurance
Long term illness of a key person can affect both the income of a business and also in many cases the employee also needs paying. Key person income protection can cover the business for loss of income whilst the employee is not working.
Executive Income Protection
Over the years we have helped 100’s of clients take advantage of the tax efficient relevant life policy. Many have asked whether or not there are tax efficient ways in which they can insure themselves as business owners or their employees for illnesses. Therefore naturally we have advised them to take out an executive income protection policy. Providing a monthly benefit to either themselves or valued employees more tax efficient than a personal policy but can be used as a business expense. Saving a company director of a limited company both tax and national insurance and protecting them against loss of earnings.
Here’s How We Work
- You can either request quotes or contact us to discuss the protection you need.
- We’ll provide you with competitive and customized solutions that cater to your specific requirements.
- Once you give us the green light, we’ll take care of all the paperwork and even put the policies in trust if required.
What is Executive Income Protection?
Protecting businesses against the financial burden of paying sick pay to an employee who can’t work is a major concern for companies of any size. Executive Income Protection provides a comprehensive solution which covers the cost of providing this benefit to key employees, as well as protecting employers from other expenses related to covering an absent employee.
The policy works by having employers (the policy owner) pay premiums monthly on behalf of the employee (person insured). If that person loses their ability to work due to illness or injury and qualifies for sick pay, then the policy will start to payout a monthly benefit directly to the employer’s account. This money can then be used to provide sick pay via PAYE and cover any related expenses such as National Insurance and pension scheme contributions associated with giving staff time off due to ill health. Additionally, it also offers peace-of-mind knowing that if these unforeseen costs arise, your business is prepared and adequately covered.
Executive Income Protection is an invaluable safety net for those with high-powered corporate positions. It provides a form of insurance against the financial losses incurred when ill health or injury occurs, and makes it possible for individuals to maintain their lifestyle even during times of hardship. The company pays regular premiums into the plan in order to protect the director should they become ill and be unable to work – either with monthly payments or by covering other expenses. This way, directors don’t have to depend solely on state benefits if ill health impedes them from physically carrying out their duties. Furthermore, premiums paid do not count as benefits on the P11D form so there’s no additional tax obligation.
This type of coverage is primarily aimed at directors in limited companies who are responsible for helping steer their organisation through turbulent times, and who require special protection due to the heightened status they hold within their business. Executive Income Protection can provide directors with peace of mind that they will be able to continue living comfortably should they become too ill to carry out their responsibilities at work.
What Options are Available for Executive Income Protection?
Executive Income Protection (EIP) policies offer financial protection for employees who have become medically unable to work due to an illness or injury. The policy covers up to 80% of the employee’s pre-tax salary, typically for a stated length until the employee retires or reaches the age of 70. There are two types of EIP policies: short-term and long-term coverage plans. Short-term plans require the policyholder to choose a specific number of years for which they would like insurance coverage, while long-term plans continue paying out until the insured is able to return to work or reach the policy expiration date.
The policy also offers an important consideration in regard to deferral period—the amount of time that must elapse before any benefits can be received from the policy. Longer deferral periods tend to receive discounts when it comes to premiums, offering greater flexibility in setting premiums. When taken together, these features make Executive Income Protection a viable option for many employers and employees across industry sectors.
Another consideration is which insurer to use. Some insurers give additional services such as Doctor Services like a 24/7 remote access to GPs. Private prescription services for spouse and family to use. Others also provide 5 free sessions for physiotherapy if required throughout the policy. Some providers offer cover for spouses. Other insurance offer business support offering valuable advice from tax experts, legal support and even tailored health fitness plans. All these factors need to be taken into account when choosing a suitable provider. There are a lot more factors to think about that just price.
Other options can include adding waiver of premium which will pay the monthly premiums for the policy in the event of a claim. This is usually advisable as paying for the premiums out of the monthly sum assured will untimely give a smaller amount than needed after deduction of paying the premiums after a successful claim.
Some insurers also allow the inclusion of employer pension contributions to be taken into consideration when calculating the sum assured.
There are also options around Premiums
When it comes to choosing the best type of premiums for an Executive Income Protection policy, there are three main options. Reviewable premiums are designed to be reviewed by the insurer at their discretion, allowing them to raise the premium if there is an increase in claims or due to economic factors. Though these premiums often start off cheaper in the beginning, they usually become more expensive over time. Age-banded premiums are initially less expensive than reviewable ones, but become gradually more expensive each year in line with your age and the higher risk of a claim being made. With these policies, you will be aware of how much the premium will rise each year as it is set out in your policy documents and can only increase by a preset amount.
Typically we recommend guaranteed premiums where the premiums never increase and these are set at the start of the policy. Whether or not these type of premiums are available will depend from insurer to insurers and it will also depend on the occupation of the person insured.
Tax Treatment of Executive Income Protection
Tax considerations are a vital component of any workplace insurance policy. Generally speaking, premiums for workplace insurance policies are tax-deductible as a legitimate business expense. Additionally, since the policy is technically owned by the company, the premiums are not treated as a benefit in kind or reported on a P11D benefits form. When benefits are paid out to the company, they are taxed as trading receipts and must be declared on both corporate and personal tax returns.
When individuals within your organization receive benefits from an insured incident, those benefits are subject to tax in many cases; they will likely be subject to Pay As You Earn (PAYE) and National Insurance Contributions (NIC). In other words, they are treated as earned income and must therefore incur applicable taxation. Moreover, these payments should also be declared on individual tax forms during the relevant fiscal year.
Here’s How We Work
- You can either request quotes or contact us to discuss the protection you need.
- We’ll provide you with competitive and customized solutions that cater to your specific requirements.
- Once you give us the green light, we’ll take care of all the paperwork and even put the policies in trust if required.
Definitions of Incapacity
The definition of incapacity differs depending on the policy, with most policies providing ‘Own Occupation’ coverage. This means that you are not entitled to any benefits under the policy if you can no longer perform your normal role due to sickness or injury. This definition is intended to ensure that individuals who are unable to work due to health concerns are still able to receive some financial relief while they look for alternative employment.
In certain cases, insurers may use an alternate definition of incapacity, referred to as ‘Any Occupation’. Under this definition, an individual must be unable to perform any type of occupation in order for them to be eligible for benefits. This is usually applicable in the event of a more severe illness or injury where there is little chance of finding a suitable new job quickly. Whichever definition is used, it is important that policyholders understand the terms and conditions surrounding their cover so they know what to expect should they suffer from an illness or injury.
For higher risk occupations many insurance companies will instead apply a definition that tests your activities of daily living. For example they will instead allow a claim in the event that the person insured cannot perform 3 out of 5 activities of daily living. These tasks vary between the different insurers but typical involve such tasks as washing, cooking, feeding yourself, walking 10 metres, dressing yourself etc
Executive Income Protection Verse Personal Income Protection
- Personal protection gives a larger choice of insurance companies.
- Personal income protection will usually give a smaller sum assured per month compared to executive protection.
- Personal income protection is paid tax as a tax free monthly income upon a claim. However there is no tax relief on the premiums.
- Executive income protection is paid as a monthly income but usually treated as a trading receipt and thus upon a claim needs to be paid and taxed as PAYE income when paid to the employee or company director.
Insurance Companies we deal with
We are independent so we deal with lots of insurers
What Our Clients Say
Some kind words from our respected clients
Speak With an Agent
If you have any questions or would like to learn more about our business protection insurance products and services, we invite you to contact us today. You can reach us via email or by phone.
Don’t wait until it’s too late. Contact us now to learn more about how we can help you protect your business and secure your future. We look forward to hearing from you soon!