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Group Income Protection Insurance or Executive Income Protection?

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What are the differences and which would be best for you?

Group income protection insurance a policy that held and paid for by the employer. It is designed to support your employees’ financially if they are unable to work because of an illness or injury. This is good as it makes the long-term sickness absences more manageable, and helps to retain important employees. The benefits will be processed through the Pay-As-You-Earn system to the company so it becomes the responsibility of the employers to see that the benefit goes to the incapacitated employee or director. Some insurers are likely to offer services on top of the benefit payments to help the organisation with the loss of a valuable employee, but also to help the employee recover so that they can return to work. An example of this would be vocational rehabilitation. This is a very helpful option as it will save money on replacing the staff member, but also so they employee can preserve the skills they use in the workplace.

Group income protection can cover up to 80% of your employees’ gross earnings, or up to a maximum of £425,000. Any cover under £150,000 doesn’t require any medical underwriting. This amount of cover can vary a lot between insurers, so speaking to an adviser is recommended to ensure you get the right amount of cover that you need. As the employer, you can choose when you want to the payments to be made or deferred and further to that, you can also choose when you want the employee’s payment benefits to start and end.

Executive Income Protection Insurance is a policy that is also held by and paid for by the employer, however unlike a group income protection plan which is one policy that covers everyone, an executive income protection plan is specifically designed for employees on a salary and also including Directors. It protects the regular income for that employee if they became unable to work because of an accident, illness or injury. This type of plan will also cover the yearly contribution to your pension that is paid for by your company. Also, any contributions that either the employer or employee pays for National Insurance are covered too.

An executive income protection plan can cover up to 80% of allowable income (plus the national insurance and pension contributions on top) or up to £300,000 total. This is a higher rate than a personal income protection plan which usually has a maximum of 70% and £200,000 so an executive plan can provide a higher level of cover and support. It is taxable as business revenue or Pay-As-You-Earn if it is being paid to the employee. The benefit is paid to the business rather than directly to the employee. This allows freedom for the business to chose what they want to do with the benefit amount, whether that goes towards covering the company’s earnings after losing a valuable team member, or whether it gets paid to the employee to help financially support them while they are unable to work. This can also be a combination of both so both employer and employee are supported while the employee cannot return to work. Similar to a group income protection plan, the pay out duration can be a set number of years or until retirement age. This can vary between insurers, so thoroughly checking the policy documents or talking to one of our expert advisers at Income Protection Expert can help you to find the most suitable policy for you.

So which is right for you?

Group income protection is useful for everyone to be covered under one plan as it makes it more manageable, but usually requires at least 3 employees to be covered. For bigger groups, the cost is lower due to the reduced amount of risk that having a larger group comes with. This type of insurance policy usually used as a part of a larger employee benefits package that can include Life Insurance and Health Insurance.

Executive income could be a better type of policy for you, as there is more flexibility for the company to decide where the benefit amount goes. The premiums themselves are tax deductible so may be more suitable for the business. Due to this, the premiums aren’t a P11D as they don’t count as a benefit in kind.

If you are considering either of these policy types, contact us at Income Protection Expert and we can help. Due to the fact Executive Income Protection Insurance is very complex, our expert advisers at Income Protection Expert are highly qualified to deal with these and we can look at getting you the best premiums available. We work with top insurers like: Legal and General, Aviva, The Exeter and Zurich.

 

Chat with an expert now!

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Speak to one of our friendly income protection experts now to find out more independent,
unbiased Income Protection information.

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Or call us on 01604 805862

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