Executive income protection for limited company contractors
As a contractor operating through a limited company in the UK, you’re accustomed to the flexibility and autonomy that comes with your work arrangement.
However, this freedom often comes at the cost of traditional employee benefits, such as sick pay. Have you ever considered what would happen if illness or injury prevented you from working for an extended period? This is where Executive Income Protection comes in, offering a financial safety net tailored specifically for limited company directors.
What is executive income protection?
Executive income protection is a specialised insurance policy designed to protect the income of directors and employees of limited companies, including contractors.
It provides a regular income if you’re unable to work due to illness or injury, ensuring that your financial commitments are met during your recovery period. The policy pays out to your business after your chosen deferred period. These funds are then passed on to you through your usual payroll method, typically PAYE.
One of the most attractive aspects of this cover for contractors, is its tax efficiency. When you take out an executive income protection policy, your limited company arranges and pays for the cover, and the premiums are typically an allowable business expense. Benefit payments are made to the company and taxed as income when paid to you, which is usually more tax-efficient than an equivalent personal income protection policy.
How executive income protection works
As a contractor, you likely don’t have access to the same sick pay benefits as traditional employees. As of April 2025, Statutory Sick Pay (SSP) offers a mere £116.75 per week for up to 28 weeks, which is hardly enough to cover your mortgage, bills, and living expenses.
Executive income protection fills the gap between SSP and your real cost of living, providing you with a substantial portion of your regular income when you need it most.
In today’s uncertain economic climate, protecting your income isn’t just sensible, it’s a crucial aspect of responsible business management. Executive income protection is an investment in your peace of mind. It offers the financial security traditionally associated with permanent employment, without sacrificing the freedom and flexibility of contracting.
Talk to our specialist protection team
Get expert advice for your specific circumstances.
Don’t put it off any longer, call 020 8421 7999 today.
The benefits of your executive income protection policy
Taking out an executive income protection policy can:
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Maintain your standard of living during illness or injury
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Protect your core outgoings (mortgage, bills, groceries)
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Cover up to 80% of the drawdown from your limited company (salary, dividends, pension contributions)
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Pay out from as little as one week of illness or injury
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Protects your earnings until your expected retirement age
- Offer additional benefits such as 24/7 virtual GP services, discounted gym memberships, physiotherapy sessions and counselling
Cover options, limitations and exclusions
It’s essential to be aware of the coverage options, limitations and exclusions of an executive income protection policy, such as:
The sum assured
Typically 50-80% of your gross salary and dividend income.
The deferred period
Set how long you wait before payments begin (from 1 day to 2 years).
The policy length
Many insurers offer cover up to age 70.
The payout period
Opt for short-term (1-5 years per claim) or long-term (until retirement) cover.
The premium type
Choose from reviewable premiums (which Initially cheaper but may increase over time), age-banded premiums (which r:ise steadily each year by a preset amount) or guaranteed: premiums (which are more expensive initially but fixed for the policy duration).
The definition of incapacity
This is a key aspect of cover to make sure you have the right policy for your needs, look for a policy that covers incapacity to carry out your "own occupation'.
Business eligibility requirements
The policy owner must be a business registered and permanently based in the UK, such as a limited company or Limited Liability Partnership (LLP).
Personal eligibility requirements
The insured individual should be 19-59 years old at policy inception, and be a company director or key employee with a significant impact on the business's success,
General policy exclusions
Be aware that exclusions may apply to your policy, such as travel to high-risk countries, self-inflicted injuries (including those resulting from drug or alcohol misuse), and extreme sports.
Pre-existing health conditions
Pre-existing conditions may be excluded from your policy or result in higher premiums.
Ready to secure your future?
Start your protection journey by filling out our simple enquiry form today:
Stage 1: Select the protection type
Stage 2: Complete brief details and one of our specialist protection insurance brokers will contact you
Expert advice on cover that works for you
Executive income protection can provide a robust, and tax-efficient, financial safety net for contractors working through limited companies. It will give you peace of mind, knowing that the majority of your income – and by extension, your lifestyle and family – are protected should you be unable to work through illness or suffering an accident.
As with all protection insurance policies, there are many variables, limitations and exclusions to be aware of , such as those listed above. Consequently it is vital that you get professional advice before taking out your policy.
Freelancer Financials has been advising contractors on protection cover for more than 20 years, and our specialist protection team is on hand to help find the right policy for your specific circumstances. Don’t put off protecting your future any longer, call us now on 020 8421 7999.
Quick links
Protection cover for contractors
Relevant life insurance for limited company contractors
Critical illness protection
