Executive Income Protection

Receive a monthly benefit if you’re unable to work for any reason physically or mentally – designed specifically for salaried employees (including Directors).

Most people are happy to insure their cars, their homes, and the things they have in them such as TVs, laptops, etc. They’ll also happily insure their pets. But they often forget to insure the thing that pays for everything e.g. mortgage, pension provision, parenting or educational costs and every other living expense — which is their income.

1 million workers are off sick for more than a month, every year.*

Executive Income Protection is a solution specifically designed for salaried employees, including Directors, who want to protect their regular income, in the event that they cannot work due to an accident, illness, sickness or injury. In fact, insurers will pay the claim if you are unable to do your own occupation for any reason physically or mentally – there isn’t a list of conditions. As such this type of policy is very comprehensive, covering health conditions ranging from cancer and heart disease, to stress and backache.

  • Protect 75% of your (the employee) pre-incapacity earnings – which can include regular income such as salary, dividends, bonus, commission, overtime and P11D benefits.
  • Plus the yearly contribution towards your pension made by the company.
  • Plus employer/employee National Insurance contributions.
  • Premiums are paid by the business and are an allowable expense for tax purposes.

So, unless you work just for fun and not the money, we suggest that an Executive Income Protection policy is the first and most important type of insurance that you should have. At a time when you don’t receive the regular earnings that you enjoy today, the policy will help ensure that a prolonged period away from work doesn’t cause financial hardship for you and your family.

Income Protection – Cause of Claims & Examples

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Income Protection - Cause of Claims plus Examples

Why do I need Executive Income Protection if the State will look after me?

Unlike Income Protection, State benefits are not designed to provide you with a replacement income. Most people can’t rely on the State alone in the event of long-term sickness or unemployment, considering:

Statutory Sick Pay can be just £88.45 per week (£383 a month) – paid for up to 28 weeks.

Employment and Support Allowance (if you are self-employed or continue on from SSP) may allow you to receive up to £109.30 per week (£474 a month).

Jobseeker’s Allowance is a maximum of £73.10 per week (£317 a month).

Would this even cover your monthly mortgage/rent payment? Think about all of the sacrifices you would have to make. How different would your lifestyle be and how would money worries affect your wellbeing?

Source: GOV.UK – Tax Year 2016/17

Group Income Protection

If you have a number of Directors/employees you’d like to cover then it is possible to have one policy that covers everyone. Group Income Protection schemes often form part of a decent employee benefit package, along with Life Cover (Death in Service Benefit) and Health Insurance. With this benefit, the company would pay the premiums and the policy proceeds would be paid to the company, which would then redistribute the money to the incapacitated Director/employee.

To be eligible for a group plan you would typically need to cover at least three people. For larger groups, due to economies of scale and the pooling of risk, the average premium per person naturally reduces.

If you would like more information about Group Income Protection please ask when you speak to your dedicated Business Protection Specialist here at Vita.

Frequently Asked Questions

How do insurers assess Income Protection claims?

This depends on the definition of incapacity for your policy. We only ever recommend policies that provide you with an ‘Own Occupation’ definition; if you cannot perform your exact role then the insurer will pay the claim. They won’t insist that you get a similar or alternative job like other substandard policies would. ‘Own Occupation’ is the most comprehensive claim definition you can have.

When will I start to receive the payments?

When you are first unable to work due to an accident or sickness there will be a period, known as the ‘Waiting Period’ or ‘Deferred Period’ when the insurer doesn’t pay any benefits. You can choose the period, typically either 1, 2, 3, 6, or 12 months. The longer you can wait before receiving the benefit, the cheaper the premiums will be. Consider how long you may receive sick pay, if any, and also what financial provisions or savings you have.

How long will the insurer pay the claim?

When you take out the policy you can choose how long you want the cover to last, which is usually until your proposed retirement age. The insurer will pay you the benefit until the earliest of:

– The end of the benefit term (e.g. if 2 years was chosen as opposed to ‘unlimited’)

– You pass away

– You are able to return to work

– You are no longer suffering a loss of earnings

– Your employment with the company ends

What if my earning drop by the time I claim?

It is likely that the insurer will base any payment on your current earnings. For this reason we will review your needs annually to check that your cover remains relevant. If your circumstances change then we encourage you to get in touch and let us know.

What about tax?

Premiums will normally be allowed as a business expense and as the policy is technically owned by your company, the premiums aren’t treated as a benefit in kind (P11D).

Benefits are paid to the company and are taxed as a trading receipt. The benefit passed on to the individual is subject to PAYE and NI, as it is taxed as earned income.

How much cover should I have? And for how long?

The amount of cover is linked to your earnings and the typical length of a policy is up until retirement. Executive Income Protection is a niche policy that requires advice in order to be set up correctly.

We don’t do off-the-shelf. We genuinely care about getting the right cover for you. Your circumstances may be similar to someone else’s, but never identical. You’ll get a solution that’s tailored to your personal needs.

How much will it cost?

Price will vary depending on your age, your health, your job, the amount of cover you want and maybe even your hobbies. This is why price comparison site quotes are often meaningless as they won’t account for your specific individual circumstances.

We will provide you with accurate premiums from the outset. Nobody likes to see a price and then be told it’s not available to them.

The Income Protection policy you buy is there to protect your income – not anyone else’s – so it’s worth finding a policy that will exactly suit your needs.

What if my company stops trading?

If you have an Executive Income Protection policy and your company stops trading, it is likely that the insurer will continue to pay the claim. If you aren’t claiming at the time then the cover will simply end.

Our friendly Business Protection Specialists are available to answer your questions, provide expert advice and make recommendations – so please call us on 0800 988 36 37 – or you can request a call back.

 

* Source: Department of Work & Pensions (Employment Publication) – click here to learn more.