Executive Income Protection

Executive Income Protection policies are essentially a type of insurance to protect a business against an employee becoming ill or injured.

The policy itself is set up and paid for by the employer but is taken out against a specific employee. If that employee is unable to work due to illness or injury the Executive Income Protection policy pays the employer a monthly benefit. This is then paid to the employee through the PAYE system.

It is usually a tax-deductible expense for the employer and can cover up to 80% of the employee's earnings.

An employer can cover any member of staff with Executive Income Protection; however it is usually put in place to cover key people within the organisation.

There is often a "deferred period", this differs depending on the provider and the policy. The deferred period is the time between the employee being unable to work and when the policy will pay out. This can be from as little as 2 weeks or up to 12 months. The longer the waiting period the cheaper the policy, usually.

Once a claim has been made, the policy can cover things like:

80% of the employee's salary

Dividends (usually for non-revenue generating employees)

Employer contributions

Support services (some policies include benefits such as 24 hour access to a GP)

Benefits are paid to the business and then passed on to the employee.

Income protection is usually taken out by an individual and the benefits from a claim are paid to that individual. Executive Income Protection is taken out by an employer and the benefits are paid to the employer.