Expert Advice on the best Executive Income Protection Insurance
Black Lion Insurance offers independent, 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). Taking a fully holistic approach, we have access to all the major UK providers. What’s more, as a holistic adviser with considerable bargaining power on our side, we could secure lower insurance premiums on your behalf.
By the way, we don’t sell. We’ll just present you with what we consider to be the best options based on the information you give us. Simply make your decision from our holistic advice. Here at Black Lion Insurance, we earn our commission directly from the insurers – we won’t charge you a penny.
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’ll be able to cover up to 80% of your drawdown (the money you pay yourself in the form of a salary and dividends). You could even protect your pension.
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 will be tax implications (of which more below).
Are you a Self-Employed Contractor?
Being self-employed at a senior level brings you a robust income and, we hope, a 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.
Or will it?
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, are you starting to get a bit overwhelmed by the sheer choice out there on the market?
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?
Essentially, if you’re a self-employed company director, you probably do need income protection insurance. You receive none of the benefits that employed people receive. Literally, none of them.
What are the risks involved, should your income grind to a halt practically overnight? Here at Black Lion Insurance we’d advise you to review your finances to see if you have enough long-term savings to cover regular outgoings. Most people haven’t, you know.
Do you feel that you could live on £73.10 per week Employment Support Allowance?
It’s not all bad news. Income protection insurance doesn’t have to cost a fortune (the amount you pay will depend on several factors) and if you’re a new company director it’s well worth considering.
Contact Black Lion Insurance today and we can help.
Executive Income Protection – How it Works in a Nutshell
After an in-depth fact find, the financial experts here at Black Lion Insurance will search the whole of the market for the best rates and very the best policies from all the major income protection insurers.
If you’re a contractor, we’ll help you individually, asking about your pre-tax earnings amongst other key information such as your health and so on; 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.
With most insurers, you’ll receive between 50% and 70% of your pre-tax income, sometimes 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?
That’s a question we can’t answer at the present time. Apologies. The premiums you pay will depend on your current state of health, your smoker status, your profession and how old you are. Plus, other aspects such as hobbies and general lifestyle.
How is Executive Income Protection Taxed?
Unlike a personal policy, this form of cover will be 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 would always recommend the “Own Occupation” definition of incapacity. This means that you’ll receive pay outs if you can’t carry out the job you do currently, rather than say a series of different, but related tasks.
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.
A Brief Guide to the Best Executive Income Protection Providers in the UK
We’ve listed the UK providers of income protection for executives. There are two: Aegon and Unum, each with a succinct high-level description.
There’s simply no such thing as a one-size-fits-all policy so do take advantage of our expertise and experience as independent financial advisers for IP protection. Remember, there’s no charge to you for our service. We earn commission from the provider with which we place your policy. And, we could get you a cheaper deal.
Also, it’s worth bearing in mind that we have great working relationships with these key providers so you may be pleasantly surprised!
Click through on each of the links to more information about these providers.
Aegon uses own occupation as an incapacity definition.
You will receive a maximum of 75% of pre-tax earnings, with a cap at £160,000 per year. This cover includes annual pension and National Insurance contributions. Your premiums will be waived if you make a claim. Benefits are paid to the employee through PAYE
This insurer uses own occupation as an incapacity definition.
Unum covers up to 80% of pre-tax earnings, up to a maximum of £300,000 per year. There’s also a premium waiver whilst benefits are being paid. Benefit is paid directly to your employer and you will receive it through PAYE.
With Unum, a rehabilitation services providers guidance and support to claimants.
How does an income protection insurance policy help when you need to claim?
You stop working due to an accident or illness, and stop earning an income.
You inform us, and we will guide you through the claims process with the insurer.
You will start to receive your monthly payout.
The monthly payout will continue for as long as your insurance policy covers.
What are your policy options?
Short-Term or Long-Term Protection
Short-term plans usually range from 6 months to 2 years. Long-term plans will pay out until you are well enough to go back to work, whether that’s 1 year or 10 years.
This can range from just a couple of days, up to a whole year. The standard length of time for most long-term insurance policies is 4 weeks.
Policy Cease Age
Maximum Pay-Out Period
What affects the costs of your policy ?
Policy Cease Age
The costs of your insurance depend on various factors.
The more you want to insure for each month, will subsequently increase your premium, as well as the length of the policy and your deferred period.
Your age can also play a role. The older you are, you are seen as more likely to make a claim and so your policy premium will reflect this.
It is important to declare any previous medical conditions or illnesses. Certain disorders may not be covered by your income insurance and others may mean you incur a higher premium.
You will also be asked about your smoking status. Smokers are deemed higher risk resulting in a higher cost for your insurance.
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We are a dedicated team of financial advisers, with years of experience in guiding our clients to a solution that meets their specific needs. We specialise in helping both employed and self employed individuals, as well as business owners on a variety of solutions, which range from life insurance, income protection insurance, keyman insurance and shareholder protection insurance.
The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK.