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Executive income protection is designed to protect a company director or senior employee’s income if illness or injury stops them working, with the premium paid by the business rather than the individual. Because the employer funds it, this type of cover can be a tax-efficient way for a company to protect the people it depends on most, though as with most business-funded benefits, the detail depends on your company’s circumstances. We compare executive income protection across the UK market, drawing on our experience of how different insurers structure this cover in practice.
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An executive income protection plan is a specialised insurance policy built around UK businesses and the key employees they rely on. If a director or senior executive is unable to work due to illness or injury, the policy pays a benefit to the company, which the business then passes on to the employee as an income.
At MyKeyManInsurance.com, we compare executive income protection UK providers, so you can find cover that suits your company and the employee it’s protecting, drawing on quotes from several leading insurers rather than a single one.
Executive income protection insurance helps fund an employee’s income during a period of incapacity, structured as a form of sick pay funded by the business rather than the individual. It’s often considered alongside relevant life insurance, another employer-funded policy, though that one protects a director’s family rather than their income specifically.
Because the policy is arranged and paid for by the employer as part of a benefits package, it can help the employee and their family maintain financial stability while they recover.
One of the potential advantages of executive income protection is its tax treatment, though it’s an area that causes some confusion and depends on individual circumstances. Here is the general position, though you should always confirm the detail with your accountant before relying on it.
If your limited company pays for the policy to cover a director or employee, premiums are often treated as a business expense and may be offset against Corporation Tax, though this isn’t guaranteed and depends on how the policy and your company are structured.
Where premiums are deductible, the payout itself is generally paid to the business first, then passed to the employee as salary, which typically makes it subject to Income Tax and National Insurance through PAYE.
| Executive | Personal | |
|---|---|---|
| Who pays? | Business | Individual |
| Tax-deductible? | ✅ Often | ❌ No |
| Are payouts taxed? | ✅ Yes (PAYE) | ❌ No |
HMRC’s guidance on how business-funded income protection is treated for tax purposes is detailed and depends on individual circumstances, so we’d always recommend checking your specific position with an accountant rather than relying on general guidance alone.
Executive income protection contributes to an employee’s sick pay while they’re unable to work due to a serious injury or ongoing illness, providing income replacement until they return to the company. Depending on the policy, cover can also extend to dividends, P11D benefits, pension contributions and National Insurance contributions, though which of these are included varies between insurers and policies.
Cover typically excludes absences arising from pre-existing medical conditions, self-inflicted injuries, or illness caused by drugs or alcohol.
For wider protection of a director’s family beyond this specific scenario, our family protection insurance page sets out the options available.
Many company directors take a combination of salary and dividends rather than a single fixed salary, and this matters when arranging executive income protection, because insurers don’t always treat the two the same way. Some calculate the available sum assured on salary alone, others allow dividends to be included if they can be evidenced as a regular part of the director’s income, and the underwriting approach varies noticeably between providers.
We regularly see directors underestimate this when comparing quotes, since two policies quoting the same headline percentage of income can produce quite different cover once dividends are factored into the calculation. It’s worth setting out your actual income structure clearly when getting quotes, so the cover reflects what you’d genuinely lose if you were unable to work.
How a policy defines incapacity has a direct effect on when a claim is likely to succeed. An ‘own occupation’ definition means the policy pays out if the employee can’t perform their own specific role, even if they could technically do some other type of work. A narrower ‘any occupation’ definition, by contrast, only pays out if the employee is unable to work in any occupation suited to their skills and experience, which is a higher bar to clear.
For directors and senior employees, whose value to the business often lies in specialist knowledge or a particular role, an own-occupation definition is usually the more meaningful form of cover, and it’s one of the details worth checking closely rather than assuming all policies define incapacity the same way.
Policies also differ in how long they’ll keep paying once a claim starts. Some are structured with a limited claim period, commonly a year or two of payments for a single claim, after which the benefit stops even if the employee remains unable to work. Others are designed to keep paying for longer, potentially up to retirement age, provided the employee remains incapacitated and the policy stays in force. Neither approach is automatically right or wrong, it depends on how much ongoing risk your business is comfortable carrying, and it’s worth checking rather than assuming when comparing quotes.
Several established UK insurers offer executive income protection, including names such as Legal & General, Aviva and Zurich, among others active in this market. While the core structure of cover is broadly similar across executive income protection providers, differences typically show up in the length of deferred period on offer, whether increasing cover is index-linked to the Retail Prices Index, and how the maximum benefit percentage is calculated, often somewhere in the region of 70 to 80% of income, though this varies by insurer and how income is assessed.
Because no single executive income protection provider suits every business, and the differences between them aren’t always obvious from a headline quote, we compare cover across the market as a whole-of-market, FCA-regulated broker, rather than recommending one insurer by default. That way, you can see how terms, underwriting and pricing genuinely differ before deciding.
As well as supporting key employees financially, executive income protection also helps attract and retain talent as part of a wider benefits package, showing a company’s commitment to the people it depends on most.
Premiums on many policies rise in line with inflation, based on changes in the Retail Prices Index, so cover retains its value over time. Many businesses pair this cover with private health insurance for small business owners, so employees are supported both while they’re at work and if they’re unable to work.
An executive income protection plan is typically underwritten on the employee’s salary, dividends and benefits, and can extend cover beyond basic pay to include pension contributions and Natonal Insurance contributions, so these don’t lapse during a long absence. Some tailored policies can also include performance-related bonuses, company car allowances and other financial perks, depending on the insurer.
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 several advantages to executive income protection for both the company and the employees it covers, from the tax treatment of premiums to the flexibility of the cover itself, set out in more detail 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 most suitable Executive Income Protection insurance from the country’s leading Executive Income Protection providers. It’s fast and straightforward to complete our 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.
Because providers differ on deferred periods, indexation and how they calculate maximum benefit, an executive income protection comparison is worth doing properly before you commit to a policy, rather than accepting the first quote you receive. At My Key Man Insurance, we help your business find tailored executive income protection plans that suit its key employees, drawing on quotes from several leading UK providers so you can compare them side by side.
Contact us today to request an executive income protection quote. It’s quick and straightforward to complete our form, and a member of our team will provide tailored quotes for your business. We also offer good rates on key person income protection, and can help with relevant life insurance, business loan protection, shareholder protection and private health insurance, so do get in touch if your business needs cover beyond executive income protection alone.
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No, in most cases the benefit isn’t paid tax free to the employee, since it’s typically passed through the business as salary and subject to Income Tax and National Insurance through PAYE. The premiums themselves may be treated differently for the business, as set out in the tax section above, though this depends on individual circumstances.
Both provide financial security if an employee falls ill or is injured, but they cover different people and are paid for differently. The individual pays the premiums for personal income protection, which can cover freelancers, self-employed people and employees, replacing a portion of personal income lost through inability to work. Executive income protection, by contrast, is arranged and paid for by the company to protect its directors or key employees specifically.
In most cases, no, because the payout is usually passed to the employee through payroll as salary continuation rather than provided as a separate benefit alongside their normal pay, which is generally how P11D benefits in kind are treated. That said, how a specific policy and payout are structured can affect the position, so it’s worth checking with your accountant or against current HMRC guidance for the policy you’re arranging, rather than assuming it never applies.
Executive income protection suits any UK business that would struggle financially if a director or senior employee were unable to work for an extended period. It’s particularly worth considering for owner-managed companies and businesses where one or two people generate a disproportionate share of revenue or hold knowledge that would be hard to replace quickly.
There’s no single best executive income protection company for every business. Insurers such as Legal & General, Aviva and Zurich all offer broadly comparable cover, but differ on deferred periods, indexation and how they calculate maximum benefit. Comparing quotes across several providers, rather than approaching one insurer directly, is usually the most reliable way to find the right fit.
Yes, executive income protection UK cover is available to limited companies across the country, though the exact providers and terms on offer can vary slightly depending on where your business and its employees are based. We compare quotes from providers operating UK-wide as part of our service.
