Home/Business protection/Executive Income Protection
Business protectionIncome protection, paid by the company.
Income protection for a director where the company pays the premiums and receives the benefit, then pays it on to the employee through payroll in the ordinary way.
How it differs from personal cover
The protection is much the same. Who buys it, who receives it and what counts as your income are all different.
- Who applies
- The company
- Who is covered
- An employed director or key employee
- How it pays
- To the company, then through payroll
- Often covers
- Salary, dividends and employer pension in some cases
The company is the applicant
The business takes out the policy on the employee and pays the premiums from company money rather than your taxed personal income.
More of your income can count
Many personal policies only recognise salary. Executive versions will often take account of dividends drawn from the business, and sometimes employer pension contributions.
Same levers, same choices
Deferred period, benefit level and how long it pays for all work as they do on a personal policy. The definition of incapacity still matters most.
How we arrange it
Establish what your real income is
Salary alone usually understates it for a director. We work from how you are actually remunerated.
Set the deferred period and benefit
There is rarely company sick pay behind a small company's own director, so shorter deferred periods are often appropriate.
The company applies and is underwritten on you
Business as applicant, you as the life covered.
Agree how a claim would be paid
The benefit goes to the company and is passed to you through payroll, which is treated as earnings in the normal way.
Executive Income Protection, answered
- How is this different from personal income protection? The company pays and receives it, and the definition of your income is usually wider. The cover itself does much the same job.
- Can it cover dividends? Frequently yes, where the dividends come from the company covering you. That is the main reason directors use it instead of a personal policy.
- Are the premiums tax deductible? Often they are treated as an allowable business expense, but it depends on the arrangement and your circumstances. Your accountant should confirm it.
- Who actually receives a claim? The company receives it and pays it to you through payroll, where it is subject to the usual deductions. Personal policies pay you directly and are normally tax free, which is why the benefit levels are set differently.
- What if I stop being a director? The cover is tied to your employment with that company. It usually ends or needs restructuring, so tell us if you are planning a change.
The benefit reaches you the same way your wages do, and is taxed the same way.
For a director drawing a small salary and larger dividends, this often covers a great deal more than a personal policy would.
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Ask us about executive income protection
Tell us where you are up to and an adviser will come back to you. The answers below just save us a phone call working it out.
- One of the five advisers on Eastfield Road, not a call centre.
- Usually the same working day.
- No obligation, and nothing to sign at the end of it.
Would rather talk now? Call 01733 602 033.
Paid mostly in dividends?
Then a personal income protection policy may be covering far less of your income than you think.