Executive Income Protection

Expert Advice on the best Executive Income Protection Insurance

Black Lion Insurance offers tailored advice to help you make an informed decision on the most appropriate executive income protection insurance for you or for your senior employee(s). What’s more, as a fully-advised brokerage, we have access to major UK providers and may be able to secure lower premiums on your behalf.

We will present you with options we believe are best based on the information you provide to help you make an educated and informed decision. There is no charge for our service, we earn our commission directly from the insurers.

We’re here to save you time, stress…and some money, if we can.

Introduction – What is Executive Income Protection?

Executive income protection is a type of insurance that will provide you or your senior staff with an income should you (or they) be unable to work due to sickness or injury. In the event of a claim, an IP policy will pay a regular monthly benefit to help meet monthly commitments, such as a mortgage and bills. Broadly, it supports the needs of:

Contractors and Company Directors who deliver their work through their own limited companies; in essence, those whose earnings may be healthy, shall we say, but who benefit from zero sick pay protection.

You may be able to cover up to 80% of your drawdown, which includes salary and dividends and could even protect your pension (subject to specific policy’s terms and conditions).

Selected employees within small to medium businesses. As a business owner you may wish to offer executive income protection to your key staff in lieu of a standard sick pay arrangement.

A limited company can own and pay for the policy. As a result, there are likely to be considerations with regards to tax.

Are you a Self-Employed Contractor?

Being self-employed at a senior level can bring in a healthy income and, we hope, a good degree of job satisfaction.

Your skills and experience have most likely commanded you a good daily rate. Why? Because, to be frank, your client needs you. Whether you work in IT, as a business consultant, adviser or sector specialist, you provide your client with the results that they appreciate. In our opinion, your business makes a substantial difference to their business.

And long may it continue.

However, have you given thought to what you would do for money if an accident or a serious illness prevented you from working? This is real life. Nobody plans to get ill. Nobody has “being hit by a car” as their life goal. Sometimes, though, life happens when we’re looking the other way.

If you’re looking for executive income protection insurance, and need guidance through the options available in the market, our experts are here to help.

Don’t worry. The experts at Black Lion Insurance are just a phone call away. Or, simply enter your criteria via our “Compare Top 10 UK Insurers” box on this website and we’ll get back to you quickly.

Are you The Boss?

As the Managing Director or Senior Partner in a small to medium sized business, one big thing may have struck you: Paying your staff the benefits to which they are entitled can be costly: annual leave, pension auto enrollment, sick pay. Who knew it could be so expensive?

Consider an executive IP policy. This could replace any sick pay entitlement and offer your valued employees peace of mind should they become ill and unable to work.

Do I need Executive Income Protection?

If you’re a self-employed company director, without some form of income protection then you are unlikely to receive any of the benefits that employed people may receive if they fall ill.

What are the risks involved, should your income grind to a halt practically overnight? Do you have enough long-term savings to cover regular outgoings for a sustained period of time? Most people haven’t, you know.

It is certainly worth considering if £90.50 per week from Employment Support Allowance would be sufficient to cover your expenses in the event of illness or injury.

Executive Income Protection – How it Works in a Nutshell

After an in-depth fact find, the insurance consultants at Black Lion Insurance will search the market for the best rates and very the best policies from major income protection insurers.

If you’re a contractor, we can assist you individually by gathering key information such as your pre-tax earnings, health status, and other relevant details. If you’re looking for IP for an employee (or employees), we’ll do the same for each person.

Should you need to claim, Black Lion Insurance will help you. Your insurer will need your completed claims form and medical evidence of your condition or injury from your GP or other medical expert.

There will nearly always be a deferred period. Read more below about how this works.

Depending on the insurer and specific policy, you may receive between 50% and 70% of your pre-tax income, and in some cases, up to 80%.

You will have agreed with your insurer your claims period. It will be until you are well enough to return to work, a specified period (for short-term claims) or even at retirement, in the case of longer-term claims.

How Much Does Executive Protection Cost?

The premiums you pay will depend on many different factors such as but not limited to the amount of monthly benefit, the length of the policy, your current state of health, your smoker status, your profession and how old you are. 

How is Executive Income Protection Taxed?

Unlike personal policies, executive income protection is subject to tax. This is because the company pays the premiums and this is a taxable benefit. In many ways, it’s similar to a “normal” salary.

To address this issue, you may want to think about insuring a higher percentage of your gross drawdown to balance out the tax you pay. In effect, your benefit will be higher.

What’s NOT included in Executive Income Protection?

Self-inflicted injuries. Any self-inflicted injuries, including illnesses caused by the misuse of drugs or alcohol will prevent you from claiming.

Pre-existing conditions. When you apply, you will need to declare any conditions that you have suffered from during the last 5 years. You should be aware that your application could be excluded because of this. However, there’s good news: a few insurers will cover you if you have type 2 diabetes.

What is a Deferred Period and Why Is This Important?

Your deferred period is specified number of months during which benefits will NOT be paid after your claim. It’s the amount of time you need to be out of work in order to claim your insurance benefits. In brief, the longer your deferred period the lower your monthly premiums.

More Useful Information from Black Lion Insurance.

You will need to consider the following:

The amount you need to live on. Obvious, really but worth careful thought. Also, do your earnings fluctuate? Ask us for advice about this one.

Deferred Period. Literally, how long you can wait before you need your insurance payments to start.

Policy cease age. Your age at which the policy will end. The higher the cease age, the more you will pay.

How long your claims period should be. Shorter term claims periods are cheaper; longer terms – more expensive, for example, up until retirement.

Incapacity Definition. We generally recommend the “Own Occupation” definition of incapacity, which means you’ll receive payouts if you are unable to perform your specific job as outlined in the policy.

Types of Premium. In brief:

Reviewable Premiums. Your premiums may start cheaper but could rise depending on your insurer.

Age-Banded Premiums. Again, cheaper premiums to start with will rise – but only by a pre-set amount established in your policy.

Guaranteed Premiums. More expensive initially but payments are locked in, unless you make any changes to your policy.

Indexation. Would you like to increase your cover in line with inflation? As a company director, you’ll no doubt be aware of this. With an indexation option, the value of your policy won’t degrade over time. In effect, you’ll be able to ensure that the sum assured increases in line with the RPI (retail price index)

Dividends. As well as a salary, you’ll be able to insure dividends. However, you’ll need to be a director actively contributing to the success of the business, either as part of a team or as the sole employee.

Group Income Protection. You should consider group income protection if you have more than one executive or director in your business to whom you wish to extend this benefit.