For company directors and senior executives, income is often closely tied to the performance of the business. If illness or injury prevents you from working, the financial impact can be significant, not just personally, but for the company as well. Executive Income Protection is designed to address this risk, offering a tax-efficient way for businesses to protect key individuals and ensure financial stability during periods of incapacity.
This article explains how Executive Income Protection works, its key benefits, and why arranging cover through a Broadbench adviser can make a meaningful difference.
What Is Executive Income Protection?
Executive Income Protection is a type of income protection policy set up by a company to cover one of its directors or senior employees. Unlike personal income protection, the policy is owned by the business, which pays the premiums and receives the benefit if a claim is made.
The benefit is paid to the company, which can then use the funds to:
- Continue paying the executive’s salary or dividends
- Cover business overheads
- Fund a temporary replacement
- Protect cash flow during a period of disruption
This structure makes Executive Income Protection particularly attractive for limited company directors who may not be adequately covered by traditional personal policies.
Key Benefits of Executive Income Protection
1. Protects Personal Income
If you’re unable to work due to illness or injury, the policy provides a regular income, helping you maintain your standard of living while you recover.
2. Supports Business Continuity
The absence of a director or key executive can place serious strain on a business. Executive Income Protection helps ensure that salaries, essential costs, and operational commitments can still be met.
3. Tax Efficiency
In many cases, premiums paid by the company may be treated as an allowable business expense for corporation tax purposes (subject to HMRC rules). While benefits are usually taxable when paid out, this structure can still offer significant tax advantages compared to personal cover.
4. Higher and More Flexible Cover
Executive policies often allow for higher benefit levels than personal income protection, particularly for directors who take income via dividends. This makes it easier to align cover with actual earnings.
5. Tailored to Senior Roles
Policies can be designed to reflect the responsibilities, remuneration structure, and risk profile of senior individuals, rather than relying on a one-size-fits-all approach.
Why Personal Income Protection May Not Be Enough
Many directors assume that personal income protection will fully safeguard them, only to discover gaps later. Common issues include:
- Dividend income not fully covered
- Benefit limits that don’t reflect total remuneration
- Premiums paid personally rather than through the company
Executive Income Protection is designed specifically to address these challenges.
Why Arrange Executive Income Protection Through a Broadbench Adviser?
Executive Income Protection is a specialist area, and the details matter. This is where working with a Broadbench adviser adds real value.
Whole-of-Market Access
Broadbench advisers are not tied to a single provider. They assess policies from across the market to identify the most suitable options, including features, definitions of incapacity, and claim terms that are often overlooked.
Bespoke Advice for Directors and Executives
Your adviser will take time to understand:
- Your role within the business
- How you are remunerated (salary, dividends, bonuses)
- The company’s financial position and objectives
This ensures the policy is structured correctly from the outset.
Tax and Structuring Guidance
Executive Income Protection must be arranged carefully to ensure it aligns with HMRC guidance and company objectives. Broadbench advisers work closely with tax and legal considerations to help avoid costly mistakes.
Ongoing Support
Needs change over time. Broadbench provides ongoing reviews to ensure your cover remains appropriate as your income, role, or business evolves and support if a claim ever needs to be made.
Final Thoughts
Illness or injury can happen when you least expect it, and for directors and executives, the consequences can extend far beyond personal finances. Executive Income Protection offers a robust, tax-efficient way to protect both your income and your business.
Arranging cover through a Broadbench adviser ensures the policy is not only competitive, but correctly structured, tailored to your circumstances, and built to stand up when it matters most.
If you’re unsure whether your current arrangements offer adequate protection, a conversation with a Broadbench adviser is a sensible place to start.
Speak to an expert
