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Can Income Protection Be Paid By a Company?

Is it possible for Income Protection insurance premiums to be paid for by a limited company?

Question asked by Ian Marlowe

Yes, it is possible for the premiums on an Income Protection plan to be paid for by a company. However, there are a number of important tax implications and there are only a select few insurers who have policies which are designed to be set-up in this way.

Firstly, you should always consult your accountant on matters of taxation and a final decision will rest with the local inspector of taxes. The information here just sets out the various options for setting up cover.

Company Paid Income Protection

When taking out an Income Protection policy there are two options to choose from. The first option is for a personal plan which is paid for out of your net income and so the benefit paid out is free from income tax. With this option the individual is the plan owner.

The second option is for an Executive Income Protection plan which is paid for by the company and any claim is paid out by the insurer to the limited company, who would then pay the employee via PAYE. With this option, the company is the plan owner.

With an executive plan usually, both income tax (and national insurance contributions) would need to be paid on the benefit should a claim arise. For this reason, it is necessary to cover a larger proportion of earnings to take into account the tax implications. With most Director Income Protection policies, you can cover up to 80% of your earnings.

Personal vs Executive Income Protection

With the executive option, the premiums are higher than on a personal plan as a larger amount needs to be insured to cover the tax payable on any benefit received. However, the premiums are paid for directly by the business.

When considering your options it’s important to discuss with your accountant to establish which option is the most cost-effective for you.

If you need help setting up your Income Protection Insurance and want to make sure you have the most suitable policy then please do not hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

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 2335 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.

Good interaction between client and advisor. Drew knew his brief; articulated and explained the issues clearly and answered questions fully. This all helped me clarify what I wanted and so we agreed on our action swiftly. I am a very satisfied client. Thank you.

Ronald Lofkin
25/07/2019
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