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Executive income protection, explained

Executive income protection is income protection a company takes out on a director or employee.

If they cannot work through illness or injury, the insurer pays the company, and the company keeps paying them.

This guide covers how it works, how it differs from key person income protection, and the limits insurers publish.

Every claim here is our summary of a named external source, linked beside it. Sources change: check the wording at the link before you rely on it.

Compare the options ↓Key person income protection →
Legal & General's monthly ceiling on key person income protection, level cover£20,833Its published maximum, subject to underwriting. Not a quote; check it at the source.

Source: Legal & General (Legal & General ↗)

01 · How it works

The company is paid, the director keeps an income

Legal & General's Executive Income Protection pays a monthly benefit to the business on a valid claim, which the business can use to fund the employee's ongoing sick pay (Legal & General ↗).

The money flows through the company and out through payroll, so the person off sick keeps being paid.

That makes it a way for a company to provide income protection for its directors and senior staff, rather than each person buying their own policy.

01

Set up

The company takes out the policy

On a director or employee, and pays the premiums.

02

Claim

They cannot work through illness or injury

A valid claim starts the monthly benefit, on the policy’s terms.

03

Benefit

The insurer pays the company

Every month while the claim continues.

04

Payroll

The company pays their sick pay

So the director or employee keeps an income.

02 · Compare

Executive or key person income protection?

Both pay the business a monthly benefit.

The difference is what the money is for.

Executive income protection keeps paying the person who is off sick (Legal & General ↗).

Key person income protection protects the business: Legal & General says it can fund a temporary replacement, protect profits or help with loan repayments (Legal & General ↗).

This page

Executive income protection

Key person income protection

Key person life cover

Pays
The business, monthly (Legal & General ↗)
The business, monthly (Legal & General ↗)
For
The employee’s ongoing sick pay
A temporary replacement, profits, loan repayments
Lost profit, recruitment, a loan
On illness
✓
✓
–
If they pass away
–
–
✓
Swipe to compare

Rows summarise how Legal & General describes its own products; check each at its link. Critical illness can be added to key person life cover.

03 · Limits

What insurers will consider

For key person income protection, Legal & General allows up to 2.5 times the employee's earnings, or 75% of the gross profit attributable to them, up to the monthly ceiling shown, with a lower cap for increasing cover (Legal & General ↗).

Royal London allows up to 75% of attributable average gross profit over three years (Royal London ↗), and Legal & General's plan can start from the employee's 18th to 60th birthday (Legal & General ↗).

These are published ceilings, not what a policy will pay: underwriting decides.

Legal & General, a month at most (level cover)£20,833

Legal & General (Legal & General ↗)

Royal London, a year at most£250,000

Royal London (Royal London ↗)

Longest Legal & General policy term (shortest five years)20 yrs

Legal & General (Legal & General ↗)

04 · Tax

Tax, briefly

HMRC's manual includes sickness in the key person cover an employer takes out against loss of profits (HMRC ↗), and allows a deduction only where the sole purpose is meeting a loss of trading income (HMRC ↗).

Sole traders and partners cannot deduct cover on themselves, and their benefits are not trading income (HMRC ↗).

How an executive policy and the sick pay it funds are taxed depends on the facts.

Ask your accountant before you rely on a treatment.

Key person insurance tax guide →
05 · Related cover

Other ways to protect directors

Income protection covers time off work.

If a director passes away, relevant life cover pays their family through a trust (Royal London ↗), and key person cover pays the business (Legal & General ↗).

Business protection insurance →Key person vs relevant life →Key person cover for directors →Group income protection →
06 · Sources

Check it for yourself

Every claim on this page is our summary of one of the documents listed here.

We last checked them against the live sources on 28 September 2026.

The documents are the authority, not this page.

Insurers and HMRC update them, so validate any figure or condition at its link before you rely on it.

Questions

Executive income protection, answered

Executive income protection is income protection a company takes out on an employee or director.

Legal & General says its plan pays a monthly benefit to the business on a valid claim, which the business can use to fund the employee’s ongoing sick pay. Legal & General ↗

The business.

It then pays the employee through payroll as sick pay, so the employee keeps an income while they cannot work.

Both pay the business monthly.

Executive income protection is there to keep paying the employee who is off sick.

Key person income protection is there to protect the business: Legal & General says it can fund a temporary replacement, protect profits or help with loan repayments. Legal & General ↗

Legal & General allows up to 2.5 times the employee’s earnings to meet the cost of a temporary replacement, or up to 75% of the gross profit attributable to them, each subject to a maximum of £20,833 a month for level cover (lower for increasing cover).

Royal London’s maximum is 75% of attributable average gross profit over three years, up to £250,000 a year.

HMRC’s manual includes sickness in the key person cover an employer takes out against loss of profits, and allows a deduction only where the sole purpose is meeting a loss of trading income.

How a particular executive policy is taxed depends on its facts, so check with your accountant. HMRC BIM45525 ↗

No. HMRC says premiums a sole trader or partner pays for life, accident or sickness cover on themselves or a partner are not allowable deductions, and the benefits are not trading income. HMRC BIM45560 ↗

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Need cover for the business, not just the salary?

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Information, not advice

We are not an insurer, broker or regulated adviser, and we do not give quotes or recommend a policy. For regulated advice, use an adviser authorised by the FCA.

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Not financial advice. This page is general information. Before buying insurance, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗). For free guidance, see MoneyHelper.