In today’s competitive business landscape, ensuring the well-being of your employees is not just a compassionate choice—it’s a strategic imperative. Executive Income Protection (EIP) stands out as a pivotal benefit, offering comprehensive financial security for both employees and employers. Here’s an in-depth look at how EIP can fortify your business.

What Is Executive Income Protection?

Executive Income Protection is a specialised insurance policy designed for businesses to provide financial support to key employees who are unable to work due to illness or injury. Unlike standard income protection plans, EIP encompasses a broader range of earnings, including:

• Salary
• Dividends
• Bonuses and Overtime
• P11D Benefits
• Spouse or Civil Partner Earnings and Dividends

This comprehensive coverage ensures that employees maintain financial stability during challenging times, reflecting the employer’s commitment to their well-being.

How Does It Work?

1. Policy Enrollment: The employer selects an EIP policy tailored to the needs of their employees.
2. Deferred Period: A waiting period (commonly 4, 8, 13, 26, or 52 weeks) is established before benefit payments commence.
3. Claim Initiation: If an employee becomes incapacitated, the employer files a claim with the insurer.
4. Benefit Payout: Upon claim approval, the insurer disburses the benefit to the employer, who then channels it to the employee through PAYE, subject to standard tax and National Insurance deductions.
5. Termination of Payments: Benefit payments conclude when the employee returns to work, reaches the end of the benefit payment period, or in the event of their death, whichever occurs first.

Key Benefits for Businesses

• Tax Efficiency: Premiums are typically considered a tax-deductible business expense, reducing the company’s corporation tax liability.
• Enhanced Employee Loyalty: Offering EIP demonstrates a commitment to employee welfare, fostering increased loyalty and job satisfaction.
• Business Continuity: By ensuring financial support for incapacitated employees, businesses can maintain operational stability and reduce the impact of unexpected absences.
• Comprehensive Coverage: EIP policies can cover up to 80% of an employee’s annual earnings, including additional benefits like employer pension contributions and National Insurance.

Additional Features

• Rehabilitation Support: Access to specialist rehabilitation teams aids employees in their recovery and facilitates a structured return-to-work program.
• Proportionate Benefit: If an employee returns to work in a reduced capacity, the benefit adjusts to reflect the change in earnings.
• Pension Contribution Support: Optional coverage ensures continued pension contributions during a valid claim, safeguarding the employee’s retirement plans.
• Waiver of Premium: Included in most policies, this feature covers policy premiums during a valid claim after the deferred period.
• Flexible Payment Options: Employers can choose benefit payment periods ranging from a limited duration to the employee’s standard retirement age (typically between 50–70 years).
• Continuation Option: If an employee leaves the company, the policy can often be transferred to a new employer, ensuring uninterrupted coverage.

Tailoring EIP to Your Business

Every business is unique, and so are its employees’ needs. Collaborating with your Broadbench adviser can help tailor an EIP policy that aligns with your company’s structure and workforce requirements. Factors to consider include:

• Employee Roles and Earnings Structure
• Company Size and Industry
• Existing Employee Benefits
• Budgetary Constraints

Conclusion

Executive Income Protection is more than just an insurance policy; it’s a strategic investment in your company’s most valuable asset—its people. By providing financial security during unforeseen circumstances, EIP not only safeguards your employees’ well-being but also reinforces your business’s resilience and reputation.

For personalised guidance on implementing Executive Income Protection in your organisation, consult with your Broadbench Protection Adviser.  

Note: All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change.

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