What is executive income protection?
Executive income protection (EIP) is an income protection policy arranged by a business on behalf of a director or key employee. Unlike personal income protection, the premiums are paid by the company and are treated as a business expense — making it highly tax-efficient.
Who is executive income protection for?
- Company directors drawing a combination of salary and dividends
- Key employees whose income significantly exceeds the standard threshold
- Businesses wanting to offer enhanced sick pay benefits to key staff
- Directors who would receive little or no employer sick pay
How is EIP different from personal income protection?
- Premiums paid by the company (corporation tax deductible)
- Higher levels of cover available (including dividends and benefits)
- No benefit-in-kind tax for the employee on premiums paid
- Payments made to the business first, then passed on as salary
Are EIP payouts taxable?
Yes — because the employer receives the payout and then pays it to the employee as salary, it is subject to income tax and National Insurance in the normal way. This is different from personal income protection, where payouts are tax-free.
How much cover is available?
EIP can typically cover up to 80% of total remuneration (salary + dividends + benefits in kind), and can include an employer's National Insurance contribution element. Policies usually pay until the employee returns to work, retires, or the policy term ends.
Frequently Asked Questions
Yes — even a single-director company can arrange EIP, and it's particularly valuable for directors drawing dividends who would otherwise be uninsured.
Most EIP policies offer 4, 8, 13, or 26-week deferred periods. Directors without statutory sick pay often choose a shorter deferred period to ensure prompt payment.
Most policies cover mental health conditions, including stress, anxiety, and depression, subject to any pre-existing condition exclusions.