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What is Executive Income Protection?
Executive Income Protection is a business-funded policy that provides income benefits to a specific employee during ill-health.
How is it Arranged?
The business owns and funds the policy, and so receives the proceeds in the event of a claim.
Unlike personal policies which pay directly to the insured person, with Executive Income Protection payouts go to the business and are passed to the employee via PAYE. Even for directors taking their income as dividends this is extremely important to retain the tax efficiency of the plan.
Key considerations include:
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Setting an appropriate monthly benefit (typically up to 80% of gross remuneration).
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Deciding if employer National Insurance and pension contributions are covered.
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Selecting the cessation age of the policy (often the employees state retirement age).
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Choosing a deferred period (this is how long the employee needs to wait until starting to receive the proceeds.
All of these individual factors, as well as the employees occupation and health/lifestyle status will impact the overall premium.
Get in touch and we will be happy to discuss this in more depth.
Once these decisions have been made, the employee to be insured will need to complete the application questions to enable the underwriting process to take place before terms can be offer.
Taxation of Premiums and Proceeds
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Premiums: Usually treated as a tax-deductible business expense.
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Proceeds: Paid to the employee via PAYE and subject to Income Tax and National Insurance at their prevailing rate.
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