Executive Income Protection & Relevant Life — Explained
If you run or contract through a limited company, standard cover can leave you badly under-insured. Here's how company-paid, tax-efficient protection actually works.
Get Tailored Advice →The problem: why directors & contractors get under-insured
Most limited company directors and contractors pay themselves a small salary plus dividends — it's the standard tax-efficient structure. The catch is that many mainstream insurers, and almost all comparison sites, only look at your PAYE salary when calculating income protection. If your salary is £12,000 but your real income is £100,000, you could be insured for a fraction of what you actually earn.
What is Executive Income Protection?
Executive Income Protection is an income protection policy taken out and paid for by your limited company on your behalf, rather than by you personally. It's built for exactly the salary-plus-dividend structure that trips up standard cover.
Key features
- Covers your total remuneration — salary and dividends — not just PAYE salary.
- Can typically insure a higher proportion of income (often up to around 80%) because it's an employer-arranged benefit.
- Premiums are usually an allowable business expense for the company.
- If you claim, the benefit is paid to the company, which then pays it to you through PAYE.
- Can also cover an employer pension contribution and National Insurance.
Executive IP vs personal income protection
| Personal Income Protection | Executive Income Protection | |
|---|---|---|
| Who pays the premium | You, personally | Your limited company |
| Covers dividends? | Often no — salary only | Yes — salary + dividends |
| Maximum benefit | ~70% of salary | Up to ~80% of total remuneration |
| Premium treatment | From your taxed income | Usually an allowable business expense |
| Benefit paid to | You directly (usually tax-free) | Company, then to you via PAYE |
What is Relevant Life Insurance?
Relevant Life is a death-in-service style life insurance policy for a single employee or director, paid for by the company and written into a discretionary trust. It pays a tax-free lump sum to your family if you die (or are diagnosed with a terminal illness) during the policy term.
Why directors choose it
- Premiums are usually corporation-tax deductible for the company.
- Normally not treated as a benefit-in-kind, so no extra personal tax or NI for you.
- Written in trust, so the payout is usually outside your estate for inheritance tax and reaches your family quickly.
- For higher-rate taxpayers, the effective cost is often lower than equivalent personal life cover.
Relevant Life vs personal life insurance
| Personal Life Insurance | Relevant Life Cover | |
|---|---|---|
| Who pays | You, from taxed income | Your company |
| Benefit-in-kind? | N/A | Usually not a P11D benefit |
| Premium treatment | No tax relief | Usually corporation-tax deductible |
| Held in trust | Optional | Yes — standard, usually IHT-efficient |
| Effective cost (higher-rate) | Higher | Typically lower |
Who should consider these?
- Limited company directors drawing a small salary plus dividends.
- IT contractors and freelancers operating through their own company.
- Company owners who want to protect income and family tax-efficiently through the business.
- Anyone previously quoted on salary alone who suspects they're under-insured.
FAQs
Executive IP & Relevant Life — Common Questions
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