Executive Income Protection: Safeguarding Your Business's Key Personnel
Apr 15, 2025
Executive Income Protection is a specialised insurance solution designed to protect the income of crucial employees or directors in the event of illness or injury. This policy offers unique benefits and tax advantages compared to personal income protection plans.
Key Features
- Covers up to 80% of gross income, including salary, dividends, and bonuses.
- Premiums paid by the company, often tax-deductible.
- Can include employer National Insurance and pension contributions.
- Pay-outs made to the company, then distributed as taxable income.
Benefits for Businesses
- Ensures financial stability during key personnel absence.
- Attracts and retains top talent.
- Demonstrates commitment to employee welfare.
- Tax-efficient protection strategy.
How It Works
- Company identifies key individuals to insure.
- Policy is purchased with the business as the policyholder.
- If the insured becomes unable to work, the policy pays out to the company.
- Company continues to pay the employee through PAYE.
Executive vs. Personal Income Protection
Coverage Amount
- Executive: Up to 80% of gross income.
- Personal: Typically limited to 60% of gross income.
Premium Payments
- Executive: Paid by the company, often tax-deductible.
- Personal: Paid by the individual from post-tax income.
Tax Treatment
- Executive: Premiums may qualify for up to 52% tax relief.
- Personal: Premiums eligible for tax relief at a marginal rate (up to 40%).
Additional Coverage
- Executive: Can include employer NI and pension contributions.
- Personal: Generally, does not cover additional employer costs.
Considerations
While Executive Income Protection offers significant advantages, it’s important to note that the policy is tied to the company. If the business ceases to exist, the cover may not be convertible to a personal policy, unlike some other business protection products. Executive Income Protection stands out as a comprehensive and tax-efficient solution for businesses looking to protect their key personnel. By offering enhanced cover and potential tax benefits, it provides peace of mind for both the company and its essential employees.
