COVERLIFE SERVICES
Executive Income Protection
Specialist income protection designed for executives and business owners.
It Can Cover Dividends. Personal Cover Usually Cannot.
Executive income protection is taken out and paid for by the company on an employee, usually a director. The company receives the benefit and passes it to the employee through payroll, taxed as earnings in the normal way.
That routing is what makes it useful. Because the money arrives as salary rather than as a tax free personal benefit, insurers can cover a much higher proportion of income, and for a director they can typically include dividends taken in place of salary as well as employer pension contributions and employer national insurance. A personal policy generally cannot do either, which is why owner managers who pay themselves mostly in dividends are so often underinsured without realising it.
Why Choose Executive Income Protection?
Our team of insurance experts specializes in providing tailored executive protection advice to business owners, directors, and high-earning professionals. Whether you're running a growing business or managing key personnel, we ensure you have the right income protection coverage at competitive rates.
What To Check
- •Whether dividends are included in the benefit
- •Employer pension and national insurance cover
- •Own occupation definition
- •The deferred period against company cash flow
- •Proportionate or rehabilitation benefit
- •That your accountant has confirmed the treatment
What is Executive Income Protection?
Executive Income Protection is a specialist insurance policy that provides replacement income if a key employee or director is unable to work due to illness or injury. Unlike standard personal income protection, this policy is paid for by the business, ensuring continued financial stability for the executive while maintaining business continuity.
Why is Executive Income Protection Important?
Losing a key director or executive to illness or injury can create serious challenges for your business:
Protect Executive Salaries
Tax-efficient way for business to pay premiums while executive receives tax-free income
Attract Top Talent
Offering income protection enhances executive benefits and employee security
Maintain Stability
Financial support allows executives to focus on recovery without income worries
Business Continuity
Replacement income continues, protecting both executive and business interests
How Does Executive Income Protection Work?
1. Policy Setup
Your business takes out a policy on behalf of a key executive or director with tailored cover levels.
2. Premium Payment
Premiums are paid by the company and are usually treated as a tax-deductible business expense.
3. Upon a Claim
If the insured executive cannot work, the policy pays regular income (typically up to 80% of their salary).
4. Ongoing Protection
Payments continue until the executive recovers, reaches retirement, or the policy term ends.
Key Benefits of Executive Income Protection
Financial Security
Provides income replacement for executives during illness or injury recovery
Attract & Retain Talent
Demonstrates commitment to executive welfare and enhances benefits package
Business Continuity
Protects your business from financial disruption caused by loss of key people
Tax Efficiency
Business premiums are usually tax-deductible, offering significant cost savings
Protect Your Key Executives
Don't leave your business's key people unprotected. With CoverLife's Executive Income Protection, you can ensure your executives have the financial security they deserve and your business maintains stability.
What The Company Can And Cannot Claim
Premiums are normally an allowable business expense for corporation tax where the arrangement is wholly and exclusively for the purposes of the trade. The benefit is then a trading receipt when it is paid to the company, and deductible again when passed to the employee through payroll, so in the usual case the two largely cancel out.
It is not generally a P11D benefit in kind for the employee, which is the other half of the appeal. As with all of this, the treatment depends on how the policy is set up and on your accountant's view of your circumstances, so confirm it before relying on it.
The Deferred Period Still Does The Heavy Lifting
As with personal income protection, the wait before the policy starts paying is the biggest lever on price. The difference for a company is that the relevant question is how long the business can keep paying the person out of its own cash flow, not how long an employer's sick pay scheme lasts.
For a small company where the insured person is also the main earner, that period is often shorter than people assume, because the business stops generating the income at the same moment the salary needs paying. Working out the real figure is worth more than comparing quotes.
Own Occupation, And Why It Matters More Here
The definition of incapacity works exactly as it does on a personal policy: own occupation pays if you cannot do your own job, any occupation only if you cannot do any job at all. For a director whose company depends on a particular expertise, own occupation is close to essential.
It is also worth checking how the policy treats a gradual return. Proportionate or rehabilitation benefit pays a reduced amount while you work part time, which for an owner manager easing back into a business is usually what actually happens rather than a clean switch from unable to able.
What It Costs
Executive income protection is priced like personal cover, from around five pounds a month subject to age, health and lifestyle, with realistic cover for a director typically landing well above that depending on the benefit level and deferred period.
The company pays it from pre-tax profit, so the effective cost is lower than the same protection arranged personally out of taxed income. For a director drawing dividends, the combination of that and the ability to insure dividend income is usually the whole argument.
Cover that often goes with this
The gaps we most often find sitting next to this one.
- Personal income protectionThe version you own and pay for yourself, if the company route does not suit.
- Relevant life coverThe other cover a company can pay for and deduct, this one paying your family if you die.
- Keyman insuranceProtects the business rather than the person. Directors often need both and buy only one.
Common questions
What is executive income protection?+
An income protection policy taken out and paid for by a company on an employee, usually a director. The company receives the benefit if a claim is made and pays it to the employee through payroll, where it is taxed as earnings.
Can executive income protection cover dividends?+
Usually yes, and it is the main reason owner managers use it. Because the benefit is paid through payroll rather than received tax free personally, insurers can generally include dividends taken in place of salary, along with employer pension contributions and employer national insurance. A personal policy typically cannot cover dividend income, which leaves many directors insured for only a fraction of what they actually live on.
Is executive income protection tax deductible?+
The premium is normally an allowable business expense where the arrangement is wholly and exclusively for the purposes of the trade, and it is not usually a P11D benefit in kind for the employee. The benefit is a trading receipt when received and deductible when paid out through payroll, so in the usual case those offset. Confirm the position with your accountant before relying on it.
How much of my income can executive income protection cover?+
A higher proportion than a personal policy, because the benefit is taxed as earnings when it reaches you rather than being paid tax free. Insurers will normally look at total remuneration including dividends for a director, plus employer pension contributions and national insurance. The exact percentage varies by insurer.
What is the difference between executive and personal income protection?+
Who owns and pays for it, and what can be insured. Executive cover is company owned and paid from pre-tax profit, can generally include dividends and employer pension contributions, and pays through payroll. Personal cover is paid from taxed income and pays a smaller, tax free benefit directly to you.
What deferred period should a company choose?+
However long the business can realistically keep paying the person from its own cash flow. For a small company where the insured is also the main earner that is often shorter than expected, because the business stops earning at the same moment the salary still needs paying.
Related reading
Guides from our team on the cover discussed on this page.
