Executive IP vs Personal Income Protection
Both replace lost income if you are unable to work through illness or injury. The difference that dictates which is right for you is whether you or your business owns and pays for the policy.
Company-funded or personal cover? Compare income protection on your figures.
Get a Free Quote →The short answer
A policy your limited company takes out on your behalf. If you are too ill or injured to work, it pays a monthly benefit to the business, which continues paying your salary as normal.
A policy you take out and pay for yourself. If you cannot work, the insurer pays a monthly benefit straight to you, tax-free, to replace a portion of what you would normally earn.
Who owns and pays for the cover. With Executive IP it sits inside the business, the company pays the premiums, and any benefit you receive is taxable. With Personal IP it belongs to you personally, you pay the premiums, and any benefit you receive is not.
Which is right for you?
- You run your own limited company and pay yourself a combination of salary and dividends
- You want your company to fund your protection in a tax-efficient way, rather than paying from personal income
- You are a director and your business would continue to have costs even if you could not work
- You want to insure up to 80% of gross income, also covering employer National Insurance and employer pension contributions
- You are employed by someone else’s business and cannot arrange cover through your own company
- You are self-employed or a sole trader with no limited company structure in place
- You want any benefit you receive to arrive tax-free, without going through payroll
- You want your policy to stay with you regardless of where you work or how your career changes
Not sure which side you fall on? We will help you weigh it up.
Get a Free Quote →Side-by-side comparison
Want cover worked out for your remuneration and tax position?
Get a Free Quote →Real-world scenarios
Illustrative examples showing how the decision tends to play out. Names and figures are for illustration only.
Sarah, 42, director of her own marketing consultancy
Sarah pays herself a £12,570 salary and £50,000 in dividends. Her company turns over £180,000 a year. She wants cover of £4,500 per month.
Read the full scenario
If she took out a personal policy, she would fund the premiums from dividends already taxed at source. Through her company, the premiums are a deductible business expense, reducing her corporation tax liability and costing her materially less in real terms.
Her company can also cover her employer NI and pension contributions, giving broader protection than a personal policy would allow. Likely better option: Executive Income Protection.
Marcus, 35, freelance UX designer operating as a sole trader
Marcus earns £55,000 a year but has no limited company, no employer, and no business structure to arrange cover through. He wants a policy that pays out if illness or injury stops him working.
Read the full scenario
Personal Income Protection is his only viable option. He arranges cover for £2,800 per month with a 13-week deferred period.
If he ever claims, the benefit arrives directly in his bank account, tax-free. Likely better option: Personal Income Protection.
Priya, 39, director reviewing both options at renewal
Priya set up her limited company three years ago. In the early years she kept her salary low and took minimal drawings, so Executive IP cover would have been modest. Now her company is profitable and she pays herself £60,000 plus pension contributions.
Read the full scenario
She already holds a personal policy she took out before incorporating. At renewal she reviews both options: Executive IP now offers significantly higher cover, and the premiums would be paid by the company tax-efficiently, but her existing personal policy pays out tax-free and is already underwritten.
The right answer depends on her marginal tax rate, her current health (which affects new underwriting), and whether the higher cover limit under Executive IP justifies switching. Best option: worth reviewing both with an IGotCover adviser, this is where regulated advice adds clear value.
The rule of thumb
Ready to see your options? Get a free, no-obligation quote.
Get a Free Quote →Frequently asked questions
How is the benefit taxed?
Can a sole trader or self-employed person use Executive IP?
Does Executive IP cover employer NI contributions and pension costs?
What happens to the policy if the employee leaves the company?
Are there waiting (deferred) periods?
How long do benefits pay out?
Related decision guides
Not sure which is right for you?
Speak to one of our advisers. We will compare both options based on your specific circumstances, free and with no obligation.
Get a Free Quote →This guide is general information about how these policies work and is not personal advice or a recommendation. Tax treatment depends on your individual circumstances and the rules may change. The figures in the scenarios are illustrative only. Consider speaking to a qualified adviser before deciding what is right for you.
