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11 Purdeys Way, Rochford, England, SS4 1ND
Smart Income Protection for Executives – Tax-Efficient Cover Paid by Your Business
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An Executive Income Protection Plan is a specialised insurance policy designed to protect businesses and their key employees. It ensures that if a key employee (such as the company director or executive) is unable to work due to illness or injury, they will still receive income. The benefit is paid to the company, which uses the funds to pay alternative income to the sick or injured employee.
There are many benefits to executive income protection for both the company and key employee. At MyKeyManInsurance.com, we can help you find executive income protection insurance to suit your company and employee needs. We will find you the best cover from the UK’s leading executive income protection providers.
Executive Income Protection Insurance provides financial support to key employees and ensures they continue to receive an income during their absence. This is done by helping small and medium sized businesses cover the cost of sick pay as a form of income replacement for the employee.
An executive income protection plan is paid for by the employer as part of a benefits package. The employer-funded benefit helps the employee, and their family maintain, financial stability during recovery from their illness or injury. The cover can help ensure that the employee doesn’t have to rely on their savings or state benefits during their incapacity.
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One of the big advantages of Executive Income Protection is the potential tax efficiency it offers — but it’s also an area that causes a bit of head-scratching. Let’s break it down simply.
If you’re a limited company and the business is paying for the policy to cover a director or employee, the premiums are usually considered a legitimate business expense. That means they can often be offset against corporation tax. Nice bonus, right?
But here’s the catch — while the premiums may be tax-deductible for the company, any payout from the policy (if a claim is made) is typically paid to the business first, then passed to the employee as salary. That means it will be subject to income tax and National Insurance
| Executive | Personal | |
|---|---|---|
| Who pays? | Business | Individual |
| Tax-deductible? | ✅ Often | ❌ No |
| Are payouts taxed? | ✅ Yes (PAYE) | ❌ No |
Want to see the official tax rules?
For those who like to dig into the details, HMRC provides guidance on how Executive Income Protection is treated for tax purposes:
The Executive Income Protection cover contributes to the employee’s sick pay while they are unable to work. The employee may be unable to work due to a serious injury or ongoing illness. The Executive Income Protection cover will replace the employee’s usual income and provide them with some financial stability until they can return to the company. The insurance can also help cover the employee’s dividends and P11D benefits. In some instances, tailored insurance can also cover the employee’s pension contributions.
Depending on the policy, the Executive Income Protection insurance may cover the employee’s National Insurance contributions. The Executive Income Protection plan may also exclude absences due to existing medical conditions, self-inflicted injuries and injuries or illnesses caused by drugs or alcohol.
The cover from Executive Income insurance may also include taxable earnings to the employees’ spouse if they stop work due to the employee’s illness or injury.
Along with providing financial stability to key employees during difficult times, Executive Income Protection insurance also helps attract and retain top talent as part of a robust benefits package. Executive Income Protection cover demonstrates the company’s commitment to employee well-being and security, while also helping the company cover the sick pay for employees.
You can get Executive Income Protection insurance with flexible terms to suit your company and key employees. We can help you find an Executive Income Protection plan that provides peace of mind for all parties. The premiums also rise in-line with inflation so that your employees get the full value of Executive Income Protection insurance cover. The premiums rise based on the changes in the Retail Prices Index.
An Executive Income Protection plan covers a significant portion of the insured employee’s salary (usually up to 80%) if they cannot work due to illness or injury. The income replacement helps the employee and their family maintain financial stability during their absence. They won’t have to rely on state benefits or savings or take a break from pension and National Insurance contributions.
The Executive Income Protection insurance will typically help cover the employee’s contributions to their pension scheme and National Insurance. Some tailored policies can also include performance-related bonuses, company car allowances, and other financial perks.
The company typically pays the premiums for Executive Income Protection insurance, which makes it a cost-effective way to provide a valuable benefit to executives. These policies are usually treated as a tax-deductible business expense. In some instances, this type of cover can be more tax-efficient than personal income protection for the employee.
There are various benefits of Executive Income Protection insurance for both the company and the insured employees.
Take a look at some of the advantages and key features of Executive Income Protection insurance below.
| Feature | Executive Income Protection | Personal Income Protection |
|---|---|---|
| Who Pays the Premiums | Employer (usually a limited company) | The individual |
| Who Is Covered | Company director or key employee | Anyone in employment or self-employment |
| Tax Treatment of Premiums | Often tax-deductible as a business expense | Not tax-deductible |
| Payout Recipient | Paid to business, then to the individual via PAYE | Paid directly to the individual |
| Use of Payout | Replaces salary/dividends | Replaces personal income |
| Underwriting Basis | Salary + dividends + benefits | Personal taxable income |
| Ideal For | Directors or employees of limited companies | Self-employed, sole traders, employees |
| Policy Ownership | Owned by the business | Owned by the individual |
| HMRC Involvement | Payout taxed via PAYE | Payout usually tax-free |
| Maximum Cover Limits | Up to 80% of income | Typically 50–65% of income |
| Common Add-Ons | Employer NI, continuation cover | Indexation, waiver of premium |
At My Key Man Insurance, we can help your business find tailored Executive Income Protection plans that safeguard your business’s key employees. With our expertise, you can get Executive Income Protection insurance that ensures your key employees remain financially secure during challenging times. We can help you find flexible and tailored insurance based on the unique demands of your company and employees. Make sure that your employees are protected should the worst happen.
Contact us today to get a quote and find the best Executive Income Protection insurance from the country’s leading Executive Income Protection providers. It’s fast and straightforward to complete our online form so that we can provide you with tailored quotes. Make sure that your employees are protected should the worst happen. We also offer good rates on Key Person Income Protection.
We can also help you find flexible and tailored plans for Key Person Insurance, Relevant Life Insurance, Business Loan Protection, Shareholder Protection and Private Health Insurance. Get in touch by emailing info@www.mykeymaninsurance.com or by phoning 02071128844 and a member of our friendly team will be more than happy to discuss your insurance requirements.
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No, executive income protection cover isn’t tax free. It is subject to employee Income Tax and National Insurance contributions. However Executive Income Protection is a tax-deductible expense for businesses. Claimed funds are paid to the company and is subsequently paid to the employee as an alternative to their usual income.
While both Income Protection and Executive Income Protection provide financial security in the event of employee illness or injury, they are designed to cover different people within the business. The individual policyholder pays the premiums for Income Protection, while the company pays the premiums for Executive Income Protection cover.
Income Protection can cover freelance workers, self-employed workers and employees. The insurance will help replace a portion of any personal income lost due to an individual’s inability to work. Conversely, Executive Income Protection is specifically used by companies to protect key employees, such as directors or executives. The individual policyholder pays the premiums for Income Protection, while the company pays the premiums for Executive Income Protection cover.
The company pays the premiums for Key Person Insurance and is the beneficiary. If the key person becomes ill or dies, the company can decide how they wish to distribute the insurance money within the business. This could involve repaying any outstanding debts or covering recruitment costs to replace the key person.
No, executive income protection cover isn’t a P11D benefit (benefit in kind). To be considered a P11D benefit, the benefit must be received by an individual in addition to their salary.
