Last reviewed and updated by Darren Shepherd: October 2026
Executive income protection is an income protection policy your limited company takes out on you. If illness or injury stops you working, the insurer pays a monthly benefit to the company, and the company pays it to you as salary. Think of it as sick pay for yourself.
The company pays the premiums, which are normally allowed against corporation tax and are not normally a benefit in kind. The benefit is taxed as salary when you receive it, but you can usually cover up to around 80% of your salary and dividends.
It is only available to directors and employees of a limited company.
Watch: executive income protection explained, in about two minutes
Ask most limited company directors what would happen if they could not work for six months and you get a pause. Employees usually have sick pay. When you run your own company, you are the one who keeps it going. If you stop, the income often stops too.
Executive income protection fills that gap, and because your company pays for it, it costs less than doing it yourself.
How executive income protection works
- The company takes out the policy on you and pays the premiums.
- You are the person covered.
- If you are too ill or injured to do your job, and you have been off for longer than the deferred period you chose, the insurer starts paying a monthly benefit to the company.
- The company pays that money to you as salary through payroll, and can also keep paying your pension contributions.
- The benefit carries on until you go back to work, the policy ends, or the claim limit is reached if you chose a limited payment period.
How it is taxed
| Personal income protection | Executive income protection | |
|---|---|---|
| Who pays the premium | You, from your own taxed income | Your company |
| Corporation tax relief on premiums | None | Normally yes |
| Benefit in kind for you | Not applicable | Not normally |
| Who receives the benefit | You | Your company |
| Is the benefit taxed | No, tax free | Yes, paid to you as salary with income tax and NI |
| Typical maximum cover | Around 50% to 65% of gross earnings | Up to around 80% of salary, dividends and benefits |
| Can it cover pension contributions and employer NI | No | Often yes, as an option |
When the company receives the benefit it counts as income for the business, but paying it out to you as salary is a business expense, so for the company it broadly cancels out.
Why it can cost so much less
It is the same logic as a relevant life plan. If you pay for income protection personally, the money has been through corporation tax and dividend tax before it reaches the insurer.
| To pay £100 of premium | Basic rate director | Higher rate director |
|---|---|---|
| Company profit needed if you pay personally | £138 | £192 |
| Company profit needed if the company pays | £100 | £100 |
| Saving | About 28% | About 48% |
Based on 2026/27 dividend tax and 19% corporation tax. At 25% corporation tax the saving is around 33% for basic rate and 52% for higher rate directors.
A worked example: what you would actually receive
Take a director paying themselves a £12,570 salary and £50,000 in dividends, so £62,570 a year in total.
| Personal income protection | Executive income protection | |
|---|---|---|
| Cover level used | 60% of £62,570 | 80% of £62,570 |
| Annual benefit | £37,542 | £50,056 paid to the company |
| Tax and NI when you receive it | None | About £10,496 |
| What you take home each year | About £37,540 | About £39,560 |
| What you take home each month | About £3,130 | About £3,300 |
| Who pays the premium | You, from taxed dividends | The company, from pre tax profit |
So in this example the take home income while off sick is slightly higher with executive cover, and the premium costs the business a lot less to fund. On top of that, many executive policies can also cover employer pension contributions and the employer National Insurance on the salary the company pays you.
This is an illustration using typical cover levels and 2026/27 income tax and National Insurance rates. Each insurer sets its own limits, and your figures will depend on your own earnings and the policy.
Choosing your deferred period
The deferred period is how long you have to be off work before the benefit starts. The longer it is, the cheaper the premium.
- 4 or 8 weeks: for directors with little in reserve, or a business that would struggle quickly without them.
- 13 weeks: a common middle ground.
- 26 or 52 weeks: where the company has cash reserves to keep paying you for a while, or you have personal savings to fall back on.
A good question to ask yourself: if I stopped working tomorrow, how many months could the business and I keep going on what we have?
Full term or limited payment
You can usually choose for the benefit to pay right up to the end of the policy, often your planned retirement age, or limit it to 12 or 24 months per claim. A limited payment period is cheaper, but it will not protect you against a long term illness, which is when you need it most.
What to watch out for
- The benefit is taxed. Do not compare executive and personal cover on the headline figures alone. Compare what you would actually take home.
- Your earnings are checked. Insurers will want evidence of salary and dividends, usually from your recent accounts or tax returns. If you pay yourself very little, your cover will be lower.
- It is tied to the company. If you sell or close the company, or stop working for it, cover normally ends. Some insurers allow it to transfer to a new employer.
- Check the definition of incapacity. The best policies pay if you cannot do your own job. Others only pay if you cannot do any suitable job.
- It does not replace life cover or critical illness cover. It pays an income while you are off. Pair it with a relevant life plan for your family.
Who is it for?
Directors and employees of a limited company. It is especially worth looking at if you are the main earner in your household, the business relies on you to bring in the money, or you are currently paying for personal income protection from your dividends.
Sole traders and partners cannot have executive income protection, but they can and should look at personal income protection.
Questions to ask yourself
- If I could not work for three months, six months or a year, what would happen to my income?
- How long could the business keep paying me without me working?
- Do I already have personal income protection, and how much does it really cost me?
- Would my family cope on what I would get?
1. Will the premiums be allowed against corporation tax for my company?
2. How much cover can I get based on my salary and dividends?
3. Should the policy also cover my pension contributions and employer NI?
4. Which deferred period makes sense for me and the business?
5. What would I actually take home if I claimed, compared with personal cover?
6. Is the definition of incapacity "own occupation"?
The bottom line
If you run your own limited company, you are your own employer, and that includes your sick pay. Executive income protection lets the business fund that safety net in a far more efficient way than paying for it yourself. Put it alongside a relevant life plan and you have the two things most employees take for granted.
Talk to your accountant about the tax side and a good protection adviser about the cover. If you would like an introduction to one, there is a link below.