As a company director, you are the main driver for your business. But what if you became unable to work due to illness or injury? 

Executive income protection insurance is a form of business insurance which could protect your company directors income if you were unable to work, meaning you and your family would be protected and your business could continue to operate.

Executive income protection can be taken out to protect your own income as a company director and can also be purchased to cover the incomes of key employees. Executive income protection has many advantages for your company.

For the best income protection quotes on the market, speak to Insure your Income today.

Executive Income Protection Insurance

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How does executive income protection work?

Executive income protection is similar to personal income protection in that it pays the company director(s) and key staff a regular replacement income if they were too ill or injured to work. The main difference between personal and executive income protection being that executive income protection is taken out and paid for by the company, with the benefit being received by the company when a claim on the policy is made.

You can insure up to 75% of your own directors income, or an employee’s income, up to a maximum of €262,500 per year.

This means that, should you or an employee be unable to work, the benefit is paid to the company after an agreed length of time (the deferred period). 

The company, having deducted income tax, PRSI, and USC, pays the director or employee a net income while they are unable to work. This means that the employee can be paid until they are able to return to work, or until the end of the policy term should they remain too ill or injured to return.

executive income protection

Benefits of executive income protection

There are numerous benefits to protecting a company directors’ and/ or key employees’ salary.

As a company director, the work you do each day is crucial to the success of your business. You may also have key employees whose skills, knowledge, and contribution are central to the operation of your company. 

Executive income protection will protect up to 75% of that income (up to a limit of €262,500) and allow you to pay yourself or your employees should they be ill or injured and unable to work. 

This will give you peace of mind that, should you or a key employee be unable to work, your business will not be financially or operationally unable to carry on and, on a personal level, that you and your family will be able to maintain your standard of living where you were unable to work.

As a company director, executive income protection will give you confidence that your business could afford to pay you, or key staff, if you were unable to work due to illness or injury. 

Executive income protection would also allow you to pay someone to carry out the work that you or a key employee does in your company as your replacement monthly income will be provided by income protection benefit rather than company funds.

Being in a position to offer generous sick pay benefits will mean that your company has an advantage in recruiting talented employees.

Executive income protection benefits will also help to retain key employees upon whose skills your company depends, as well as increase staff morale.

You can also choose to protect director or key employee pension contributions under an executive income protection plan. 

Pension contributions of up to 33% of salary, up to a maximum of €50,000, can be protected meaning that employer pension contributions can continue while you or an employee are unable to work.

There are also tax incentives to purchasing director’s income protection as the premiums paid are allowable against corporation tax. This makes executive income protection more affordable for your company.

Under current Benefit in Kind rules, executive income protection premiums should not be liable for Benefit in Kind for employees.

Benefits of executive income protection

Who provides executive income protection?

Executive income protection is currently provided in Ireland by these providers:

Purchasing executive income protection

Income protection is best purchased through an insurance specialist, such as Insure Your Income, as we can find you executive income protection cover that is tailored to the nature, size, and needs of your company and the individual circumstances of its employees.

Here are some factors that you may wish to consider in purchasing income protection:

It is crucial when your company is purchasing executive income protection that you ensure that you are not over insured. If an employee has personal insurance plans that provide protection for illness, accident, or injury then there are limits to the amount they can claim i.e. no more than 75% of their income, and your company may be paying for benefits that they cannot claim.

The term of the policy will also affect the premium you pay for executive income protection as providing cover later in life will increase the premium. You may choose a policy for directors and employees that ceases to provide cover at retirement age. Some insurers offer cover up to the age of 70.  

It is possible to choose executive income protection that offers additional benefits such as a hospital cash benefit, where a cash payment is made for each day an employee is hospitalized (subject to a minimum stay in hospital), indexation and guaranteed insurability.

You may choose to protect the executive income protection benefit that your company provides from the effects of inflation by choosing an indexation option.

In general, if you choose indexation, the premium paid will increase each year in line with the increase in cover amount.

Guaranteed insurability, or a conversion option, allows the company to make changes to the benefit provided to a director or employee during the term of the income protection policy.

This option allows the company to increase the benefit provided under the policy at regular intervals in line with salary increases, or length of service, without the director or employee having to provide new medical evidence.

The deferred period that you choose will also affect the premium you pay for executive income protection. In general, the longer the deferred period the lower the premium you will pay. 

The deferred period is the period of time that must elapse before benefit is paid to the company, generally deferred periods between 4 and 52 weeks are chosen.

If your company has sufficient resources, you may be able to pay the employee sick pay for an initial period before receiving executive income protection benefit.

It is also possible to choose executive income protection with split deferred periods meaning that a lower rate of income protection benefit can be paid initially after the deferred period, increasing to a higher rate after another set time period. This will lower the cost of executive income protection.

Executive income protection can be paid as a reduced payment if a director or employee’s illness or injury is such that they are unable to return to work in their previous role.

If an employee covered by the policy has to return to work in a reduced capacity or in an alternative role, due to the nature or extent of  their illness or injury, then the executive income protection policy may pay a partial or reduced benefit to allow for their reduced earnings following their return to work.

Contact us today

Executive income protection offers you peace of mind as a company director. Your income and those of key employees would be protected if you or they were unable to work due to illness or injury, allowing your business to continue should someone be out of action.

You cannot set up an executive income protection policy once a director or an employee is already out of work due to illness or injury so don’t delay in putting this important protection for your company in place today.

Insure Your Income are insurance specialists in executive income protection for company directors and can discuss the needs of your company or business with you to find your company appropriate and affordable financial protection.

Contact us or fill out our online assessment and we can advise you and assist you to find executive income protection.

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