Executive income protection a guide for company directors

Executive income protection is a type of income protection insurance that a UK limited company takes out and pays for, insuring a director or senior employee's income if illness or injury stops them working. Rather than the individual arranging cover personally, the business owns the policy, pays the premiums, and is named as the policyholder.

If you're not yet familiar with how personal cover works, our income protection insurance: the complete guide explains the basics before you read on. This guide focuses specifically on the company-paid, company-owned version aimed at directors and senior employees.

Who pays, who owns the policy, and what counts as income

The company is both the payer and the owner of an executive income protection policy. The director or employee is the person whose health and income are assessed for underwriting, but they have no direct financial relationship with the insurer. This distinction matters because it changes how the premiums and any benefit paid out are taxed, which we cover in detail further down this guide.

Cover level is normally based on salary and regular taxable benefits reported on a P11D, such as a company car or private medical insurance. Dividends, which many director-shareholders rely on for a large part of their income, typically don't count towards the cover an insurer will offer. This is one of the most important things to understand before comparing a company-paid plan with personal cover.

Executive income protection follows a defined sequence from taking out the policy to a benefit reaching the individual if a claim is accepted.

Executive income protection and personal income protection insurance both protect your income if illness or injury stops you working, but the way each is arranged, paid for, and taxed is quite different. Our personal income protection explained guide covers the individual version in full detail.

For many director-shareholders who take a low salary and draw most of their income as dividends, this difference matters a great deal. A personal policy based on salary alone might, in some cases, secure a similar or even higher level of usable cover than an executive plan, simply because dividends aren't factored in either way. Which option actually gives you more usable cover depends on your specific salary and dividend split, so this is genuinely a case where individual advice is worth having before you decide.

Executive income protection has a specific tax treatment that applies to both the premiums and any benefit paid out, and it's one of the main reasons directors consider it in the first place.

Premiums are normally a tax-deductible business expense

Premiums paid by the company are normally treated as an allowable business expense, provided the cover is taken out wholly and exclusively for business purposes. This means they can typically be deducted when working out the company's Corporation Tax bill. Because the policy is arranged for business purposes rather than as a personal perk, the premiums are not usually treated as a benefit-in-kind for the insured director or employee, so there's normally no P11D entry or personal tax charge on the premium itself. For the underlying guidance on insuring employees and other key people, see HMRC's Business Income Manual (BIM45525), checked July 2026.

The benefit is taxed as income when it's paid out

The tax-efficient treatment of the premium doesn't carry through to the benefit. If a claim is accepted, the insurer pays the monthly benefit to the company, and the company then pays it on to the individual through payroll. At that point, it's treated as employment income and is subject to income tax and National Insurance in the normal way, similar to how employer-funded sick pay is taxed. HMRC's guidance on sick pay funded by the employer, including permanent health insurance (EIM06410), sets this out in more detail, checked July 2026.

Pension interaction: specialist territory

Whether an executive income protection benefit counts as relevant UK earnings for pension purposes, and how it interacts with any employer pension contributions already in place, depends on the specifics of your scheme and how the policy is structured. This is a genuinely specialist area, and it's worth checking with your accountant or an advisor before assuming how the two interact for your business, rather than relying on general guidance alone.

What an executive income protection policy actually covers, and what it typically excludes, follows directly from how cover is calculated.

What's typically covered

Cover is normally based on salary and regular taxable benefits reported on a P11D, such as a company car, car allowance, or private medical insurance provided by the business. Own-occupation definitions of incapacity, meaning the policy pays out if you can't do your own specific job, are common at this end of the market, though this varies by insurer and is worth checking before you compare providers.

What's typically excluded

• Dividend income, even where it makes up the majority of a director's actual pay
• Irregular or one-off bonuses, as opposed to guaranteed, regular salary
• Pre-existing medical conditions, which are usually excluded or subject to a premium loading

Because dividend income isn't covered, the level of cover a director can secure through an executive plan can look quite different from their actual take-home pay, particularly for director-shareholders who deliberately keep salary low for tax efficiency. It's worth working through this with an advisor before assuming a particular level of cover will be available.

Executive income protection is offered by a smaller pool of insurers than personal income protection, and underwriting can vary significantly between them for what looks like the same director on paper.

• Legal & General
• LV=
• Royal London
• Aegon
• Unum

These insurers, and others that offer the product, differ in how they treat salary and dividend income, how they define incapacity, and what maximum age and cover levels they'll offer for a given occupation. This is exactly why comparing more than one insurer matters here specifically: the same director's application can be priced and underwritten very differently depending on which insurer assesses it, described factually rather than as any kind of guarantee. All insurers offering this type of cover in the UK are regulated by the Financial Conduct Authority, and you can check any insurer's authorisation on the Financial Conduct Authority register.

If you'd also like to see how these insurers compare for personal cover, you can compare income protection providers to see how the market looks for individual policies.

Whether executive income protection is worth it depends on how you draw income from your company, and what would happen to the business if you or a senior employee couldn't work for six to twelve months. It deserves a balanced answer rather than a sales pitch.

The case for it

• Premiums are normally a tax-deductible business expense, reducing the net cost to the company
• There's usually no benefit-in-kind charge on the premium for the insured director or employee
• It protects the continuity of a key person's income, which can matter as much to the business as to the individual

The case against, or reasons to think twice

• The benefit is taxed as income once it's paid out, so it isn't the tax-free windfall the deductible premium might suggest
• Dividend income isn't covered, which limits how useful it is for directors who take a low salary and high dividends
• Cover usually ends if the director or employee leaves the company, unlike a personal policy

A simple decision checklist

• How do you actually draw income from the business: mostly salary, mostly dividends, or a mix?
• What would happen to the business, financially and operationally, if you couldn't work for six to twelve months?
• Do you already have shareholder protection or key person insurance in place, and how would executive income protection sit alongside it?

If your income is mostly salary and the business genuinely depends on you being able to work, executive income protection is worth serious consideration. If dividends make up most of your pay, it's worth comparing carefully against personal cover before assuming the company-paid route is the better fit. MoneyHelper offers free, impartial guidance if you want an independent view alongside advice from a broker or accountant.

Executive income protection is generally available to UK-resident employees and directors of a UK-registered limited company. Most insurers will consider applicants from around age 17 or 18, up to a maximum age that commonly falls somewhere between the individual's 65th and 70th birthday, depending on the insurer and occupation.

Maximum ages, and the minimum age at which a policy can first be taken out later in life, vary meaningfully between insurers, and some insurers won't offer new cover to applicants over a certain age even if their standard maximum end age is higher. Because this detail changes by insurer and by occupation, it's worth checking the exact terms with the specific insurer you're considering, or comparing more than one through an advisor, rather than assuming one insurer's terms apply across the market.

As a director, it's also worth understanding how director and officer liability insurance protects you personally against legal claims relating to how you run the business, a different risk entirely from income protection.

Getting an executive income protection policy in place involves a handful of practical steps before you compare insurers. It's also worth reviewing this alongside your wider business insurance guide, and comparing business insurance costs for other types of cover your company may need.

No single insurer's product page can tell you how a competitor would underwrite the same director's salary and dividend mix, or health history. Because eligibility and cover levels can vary significantly between the small number of insurers that offer executive income protection, comparing across more than one matters more here than with many other types of cover.

An advisor can talk through how your business is structured, how you draw your income, and what level of cover is realistic, then compare providers on your behalf. It's a conversation, not a sales pitch: access expert advice with no pressure to proceed, and take as long as you need to decide what's right for your business.

If your review with an advisor also touches on mortgages or other borrowing secured against the business or your home, it's worth keeping in mind that your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

If you'd like independent guidance alongside advice from a broker or accountant, MoneyHelper offers free, impartial money guidance at moneyhelper.org.uk or on 0800 138 7777.