Executive Income Protection

With an Executive plan the policy is owned by the company but is underwritten on the life of an employee or director. If that staff member needs to go off work due to ill health the plan would pay out a monthly benefit to the business, with the business then distributing the funds to the employee via the usual payment method (e.g. PAYE).

How long the policy can continue paying out is an option that needs to be selected from the policy outset. It is possible for plans not to have a payout limit so it could keep paying out right up until retirement age if the employee is unable to return to work, or the payout length can be set at a maximum of 2 years or 5 years.

With this type of plan it is also possible to select options where the insurer would also cover Employer National Insurance Contributions (NICs) and Employer Pension Contributions, thus removing any ongoing financial outlay for an incapacitated employee.

The policy pays out a monthly benefit to replace lost earnings due to ill health;

How much can I cover?

It is possible to cover up to 80% of gross earnings (which can include dividends).

For how long will I be covered?

The policy can payout for 2 years, 5 years or up until retirement age (optional).

Whe would it start paying out?

The plan would start paying out after a ‘deferred period’ (options of 4 to 52 weeks).

Executive Income Protection Insurance is a type of cover that needs to be set-up by an adviser. Please feel free to call us on 0208 432 7333 to get started.

The process for setting up cover is as follows:

1. Contact an adviser to provide specific information about the employee to be insured, such as age, earnings, occupation and any health considerations;
2. Decide on the policy options you would like to gain pricing for, which may vary depending on the following:
   1. Level of cover to be offered, which often ranges from 50% to 80% of gross income;
   2. Setting the deferred period, which is commonly set in-line with the end of any company provided sick pay;
   3. Deciding whether Employer National Insurance and Pension Contributions are to be insured;
   4. Discuss what options you would like to see varying the policy payout period, with the shortest being 2 years and the longest being until retirement.
3. The adviser sends you (via email) a range of options that are within budget for you to consider;
4. Once an option is selected we can run through the application with the employee / director over the telephone;
5. The insurer will then consider the medical information in the application before making an offer of insurance.

Given that this policy is owned by the business the monthly premiums would be paid for and expensed through the business. However, any benefit paid out by the policy would be taxable as income for the employee and this should be remembered when setting the level of cover.

Naturally, if the employer is paying Employer National Insurance Contributions on the income it pays to staff then this would also be due on any of the benefit that is paid out, that is why it is wise to consider including the policy option to cover Employer NI, especially for plans with a payout period to retirement (i.e. without a 2 or 5 year payment limit).

Executive Income Protection is often taken out by a company for one of their staff members or Directors as an employee benefit. It is therefore an individual plan (owned by the firm) with individual pricing rates.

However, if the company has a minimum of three employees that they would like to be covered then it is possible to take set-up a Group Income Protection Scheme, which would cover all the employees under one policy and benefits from lower group insurance rates.

Other policies that typically make-up an employee benefits package include the following:

Relevant Life Insurance

If cover is required just for one employee then a Relevant Life Policy is the most tax efficient means of gaining cover as the premiums can usually be expensed and the benefit is paid tax-free via a specific relevant life trust;

Private Medical Insurance

This is a particularly popular employee benefit as the policy would cover the cost of private medical treatment, private health insurance enables you to avoid potentially long NHS waiting lists and allowing the employee to return to work as quickly as possible.

In addition to Executive Income Protection, we are also able to help with these other employee benefits, either as individual plans or as a group scheme for multiple staff members, simply call us on 0203 432 7333.