EXECUTIVE
INCOME PROTECTION
Executive Income Protection can help company directors by protecting their earnings against the financial repercussions of not being able to work due to illness or injury.
Providing your business with a regular income when an employee or director falls ill
Executive Income Protection can help small business clients by protecting against the financial impact of their employee becoming ill or injured and unable to work.
The plan is designed to pay a monthly benefit to the business in the event of a valid claim. This can be used to fund the employees or directors ongoing sick pay so they can meet their financial commitments whilst not leaving them to rely solely on their savings or state benefits.
Cover can include up to 80% of the employee’s earnings, dividends and P11D benefits. Additional cover can be arranged at an extra cost to cover employer pension contributions and National Insurance (NI) contributions. Company Directors qualify for this valuable benefit, without incurring P11D benefit in kind tax.
WHAT WOULD HAPPEN IF YOUR INCOME STOPPED?
Executive Income Protection is designed for small and medium businesses to cover the cost of providing sick pay benefits to a key employee, including controlling directors.
The policy is arranged and paid for by the employer (the policy owner) on the life of the employee (person insured). If the employee (person insured) becomes ill or injured and unable to work, the monthly benefit under a claim is paid to the employer (policy owner) who passes onto the employee via PAYE to fund ongoing sick pay. The employer can also cover other costs (for example their employer’s National Insurance and pension scheme contributions).
LETS LOOK AT AN EXAMPLE
Tom is a sole director and owner of his business. He has a good income and the business contributes £1000 per month into his pension. Tom is 40 and hopes to retire by age 60.
Unfortunately he becomes seriously ill and is unable to work. The business is well financed and has good capital reserves but Tom is essential to the long term profitability. The business and Tom's livelihood (in its current format) will not survive unless he returns to work within a reasonable time.
If Tom has Executive Income Protection he can be assured that his income can be maintained in both the short and long term.
Most importantly, should Tom be unable to return to work at all, he has the peace of mind knowing that his pension contributions as well as his income can be maintained, until he reaches his normal retirement date. This means that In addition to up to 20 years of income, Tom's policy can fund over £200,000 in pension contributions for him over the lifetime of the policy.
KEY FEATURES OF EXECUTIVE INCOME PROTECTION
The monthly benefit pays out to the employer and is passed on to the employee via PAYE to cover the cost of sick pay, so protecting the business finances.
Designed for small and medium businesses (SMEs).
Usually counts as a tax-deductible expense for the employer.
Covers up to 80% of the employee’s earnings plus the employer's National Insurance and pension contributions (up to the maximum limit being applied).
More tax efficient than personal Income Protection cover for the employee.