Specialist Income Protection for Company Directors

Difference Between Personal And Executive Plans

Personal and executive policies are the same in that they payout a monthly benefit if you cannot work due to illness or injury but differ with regards to who owns and pays for the policy.

With personal income protection you own and pay for the policy, whereas with executive income protection your company owns and pays for the policy.

If you need to make a claim, with a personal policy the insurer will pay you directly and the benefit received will be free from income tax. With an executive plan the funds will be paid to your company, which can then be distributed to yourself. As the benefit paid will be treated as a trading receipt it will normally be taxable.

To cover the potential tax that would need to be paid on an executive policy payout, you are usually able to cover up to 80% of your salary and dividends, rather than around 60% with personal cover.

Key Differences

With executive income protection you are also able to cover employer National Insurance Contributions (if applicable) and pension contributions (which can have sizeable pension tax benefits for directors).

Which Policy Is Best For Directors?

Many Company Directors like Executive plans because their business can pay the premiums rather than having to pay for the policy personally from after tax income.

It is important to check with your accountant that they are happy for the premiums paid by your company to be put through as a tax deductible business expense.

The current precedent tends to follow the employee benefits market, where group income protection premiums are a cost of business and any payout from the policy is taxed.

How much does it cost?

The pricing structure for personal and executive policies are broadly the same – it depends on:

• How much you want to cover;
• How long you can wait before the policy starts paying you (called the deferred period);
• The term length of the policy;
• How long the policy can payout for (until the end of the policy term, 5 years, 2 years or 1 year);
• Your age when you take out cover;
• The type of work you undertake;

As well as business travel requirements and whether there are any medical considerations or hazardous hobbies to account for, such as private aviation.

Although personal income protection quotes are readily available online, executive plans are more specialised and online quotes are not available. To discuss your executive income protection options please do not hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk

Setting Your Deferred Period

If you run your own business you naturally do not have a sick pay entitlement in the usual sense, but rather you may have some of the following that could help keep you afloat for a little while should you suffer a minor illness or injury:

• Existing capital reserves in the business
• Outstanding client invoices that are still to be paid
• Personal savings outside of the business

If you are able to utilise any of these sources of funds to cover short-term incapacity, it makes sense to stretch out your deferred period from 4 weeks to 13 weeks, or longer. Moving from a 4 week deferred period to 13 weeks can lower your premium by around 40-50%.

Is Your Husband/Wife Also A Director?

For tax reasons, it is common for contractors or freelancers to include their wife/husband as a director of the business if they don’t already work and receive an income from another source.

If this is the case and your partner has no revenue generating role within the business (i.e. there is no business without you), then it is often possible to insure a percentage of their dividends on your policy. This enables the policy to more fully reflect the potential loss to household income if you were out of action. Please contact us for more information on how to set this up.

Other Company Owned Policies

Relevant Life Insurance

Another popular policy with Company Directors is Relevant Life Insurance. This very similar to normal life insurance in that it is taken out to provide for your loved ones if you passed away, but it is owned by your company and the premiums usually qualify as a tax deductible business expanse, so there can be significant tax savings to be made by taking out life cover this way.

Private Health Insurance

Given many small businesses rely on a few key people it is important if they are unable to work to be able to get back on their feet as quickly as possible. Private Health Insurance enables them to bypass NHS waiting lists and receive private medical treatment quickly when they need it most.

Pension Advice

Also, many eventual Company Directors first tend to build up experience working for a number of leading firms before going it alone. If this is the case then there can be significant benefits to consolidating previous company pensions into a ‘new style’ arrangement (with new contributions being paid by your business, which is usually an allowable business expense). Our specialist pension advisers would be happy to talk you through these benefits, but the ultimate goal is ensuring that you’re maximising your potential retirement.

Get Expert Income Protection Advice

We are able to talk you through the options in detail, including explaining the ins and outs of cover along with providing you with quotes and guidance on the most suitable insurers.

We understand your needs as a Company Director, so if you are thinking about income protection then please do not hesitate to get in touch

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

• There is no fee for our service
• We are independent and impartial
  Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
• We’ve got bargaining power on our side
  This allows us to negotiate better premiums for you than you going direct yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 3770 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
• Claims support when you need it the most
  You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.