Executive Income Protection

Executive Income Protection

Keep paying your key people, and keep the business steady, if illness or injury stops them working.

What happens when a director is off sick for six months?

Statutory sick pay won’t come close to a director’s salary. Most businesses then face a hard choice. Stop the salary, and the person and their family take the hit. Keep paying it out of cash flow, and the business takes the hit, at the exact moment it has lost someone it relies on.

Executive Income Protection removes that choice.

How it works

• The business takes out and owns a policy on a director or key employee.
• If they can’t work because of illness or injury, the insurer starts paying a monthly benefit to the business once a waiting period you choose has passed.
• The business uses that money to keep paying their salary through payroll. Depending on the insurer, it can also cover employer National Insurance and pension contributions.
• Payments continue until they return to work or the benefit period ends.

Why the business pays, not you personally

• The premiums come from the business, not from your own taxed income.
• Premiums are usually treated as an allowable business expense. The benefit is paid to the business and is normally taxed as business income.
• It sits alongside your personal arrangements rather than replacing them.

The choices we’ll make together

• Waiting period: how long the business can fund sick pay itself before the policy starts paying. This is commonly anywhere from four weeks to a year.
• Benefit period: whether payments are limited to a set term for each claim, or continue until the policy ends.
• Level of cover: based on salary, within each insurer’s limits.

Common questions

How is this different from Key Person cover?

Key Person cover pays the business a lump sum if someone dies or becomes critically ill, to replace lost profit. Executive Income Protection pays a monthly amount so their salary keeps going while they’re off sick and recovering. Many businesses need both.

Is it a taxable benefit for the employee?

Normally not. The business owns the policy and receives the benefit.

What if they come back part time?

Many policies pay a reduced benefit during a phased return to work.

Find out where your business stands

Take the Business Resilience Health Check or call 0121 663 0171.

Tax treatment depends on individual circumstances and may change. Executive Income Protection has no cash value and pays out only on a valid claim.