Find out the Best Income Protection* Insurance for Managers and Executives
If you are a shareholding director, or non-shareholding executive of a company, you are able to protect your ability to keep earning your incomes from a risk, such as suffering an injury, or developing an illness, that prevents you from carrying out your normal business activities, by taking out income protection for managers and executives.
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Often referred to as 'directors income protection,' this type of insurance cover will ensure your earnings and family savings are protected and that when you finally recover nothing will have been lost. Income protection insurance will pay you a monthly benefit should you unfortunately find you are no longer able to attend to your responsibilities in regard to your business. The sickness and injury benefit will comprehensively cover you for practically any medical condition including such serious ailments as cancer, backache, stress and heart disease.
Additional Options are Included in Income Protection for Managers and Executives
Income protection for managers and executives is different to most other similar types of insurance covering other professionals in that you will have two distinct options to choose from regarding how you want the premiums paid. These are:
- You can opt for a personal plan and pay the premiums directly yourself.In this case you will be able to insure up to 65 percent of your gross before tax earnings. Earnings of shareholding directors are calculated on gross salary plus any dividends paid, and this means any benefits paid would not be subjected to income tax. If your premiums are paid from your personal bank account you will have to pay an insurance premium tax (IPT) on each monthly premium paid. The benefits received following a successful claim will be tax free. This is why, in this case, you can insure up to 65 percent of your gross monthly earnings.
- You may opt to go for the executive planIn this case you can arrange to have the business pay the premiums for you. However, if you choose the business pay option any claims made will result in the benefit being paid into the business, not to you as an individual. A big advantage of having the business paying the premiums is that it can then be included as part of an insurance package where other types of insurance cover can also be included. If you take out this plan you will be able to insure 80 percent of your gross earnings but your benefit payments will be subjected to you paying income tax on them. Premiums paid under this plan can be offset against corporation tax but the benefits paid under a successful claim will be subjected to you paying income tax on them. This is because it will be regarded as part of your PAYG or Schedule D earnings.
- It is usual for income protection for managers and executives policies to have a term of five years but you will be able to arrange cover up to age 70 if you wish to do soMany people choose to have the cover cease when they plan on retiring. By doing this you will be ensuring that if something serious was to happen and it resulted in you never being able to return to work for the remainder of your working life, you would continue receiving benefits up to the time you officially retired. An advantage income protection policies have is that you can make many claims over the time you are insured. The reasons for your claims can be from the same illness recurring but you will still remain covered, no matter how many successful claims are made over the years.
How Dividends can Affect Your Benefits
Some insurers will calculate the maximum amount of cover you are allowed, to be based on your average earnings over the last three years when dividends are involved. Others, however, will calculate your earnings on the past 12 months only. The advantage of having your earnings calculated over the longer term, or the shorter term, will depend on the fluctuations of the amount of dividend being paid. When you involve dividend payments you will have the additional flexibility of being able to insure your earnings between 50 and 65 percent of your gross earnings which will include both your salary and the amount of dividends paid. Any dividend paid will have to be separate to your salary and you must be actively involved in the success of the business either as the sole employee or part of a team.
When you involve dividend payments you will have the additional flexibility of being able to insure your earnings between 50-65% of your gross earnings which will include both your salary and the amount of dividends paid.
Setting Your Deferred Benefit Term
Setting your deferred benefit payment period is important in calculating the cost of your premium. The longer you are willing to wait, the lower the premium cost. It is usual for most people to wait for one month to a year. It will depend a lot on how long your business pays you sick leave or the amount of savings you have put aside for a 'rainy day.' You can arrange it so your benefit payments begin as you company sick pay ceases.
Income protection for managers and executives can also be taken out by the company as a group plan that covers a number of the top managers and working executives. The premium for the group plan will be paid by the company concerned and the benefits received would also be paid to the company. The benefit is then paid to the ill person by the company until he or she recovers enough to be able to return to work.