Executive Income Protection: Yes, business owners, you need it

If you’re a company director, you need Executive Income protection, me included! My worst fear in business; what happens if I get ill? Where is the income coming from? How long can the business sustain my illness?

Yes, a cough or cold, that’s fine. The business can sustain our absence for a week or two, maybe even a month. But, what about more serious illnesses?

The Exeter’s Income Protection Claims Statistics 2021* has shown that the average length of claim on an Income Protection policy was 2 years! How would that effect your business?

Statutory Sick Pay is paid at £99.35 per week/ £430.51. I don’t know about you, but that wouldn’t touch the sides of the bills that we have to pay each month.

That’s where your Executive Income Protection policy comes in.

What you need to know.

Exec Income Protection doesn’t provide cover for all your income, but we do have providers on our panel that will provide up to 80% of your income (most providers offer between 60 and 65% cover).

Each policy is tailored to the individual, with deferred periods ranging from 4 to 52 weeks and cover can be in place to age 70. Benefit payment periods can range from full cover for the duration of the policy, or you can select either 1 or 2 years limited benefit payment periods at outset. When a limited benefit payment period is combined with a longer deferred period the premiums can be greatly reduced, helping to achieve the right balance of benefit and cost for each business. 

Executive Income Protection can also include monthly pension contributions, so that your retirement plans stay on track. We can also include your National Insurance contributions, so the business isn’t having to cover those too.

An advantage of Executive Income Protection over Personal Income Protection is its tax efficiency. Typically, HMRC allows premiums to be treated as an allowable business expense, with Corporation Tax relief available and no additional income tax or National Insurance to pay. The benefits from the policy are paid tax free to the business and taxed as a trading receipt. The business then pays the employee in the form of salary or dividends. 

What are you waiting for? If this article has resonated with you, get in touch. Use an adviser like us that can recommend the right product, for you, your personal circumstances, and your monthly budget.

Thank you for reading! 

Tarnia Elsworth
Director and Protection Adviser. 
Phone:     01524 920015
Mobile:    07951113654
Web:        www.tpfinancialsolutions.co.uk/protection
Email:       tarnia@tpfinancialsolutions.co.uk