If any of these key individuals are unable to work for a prolonged period (or even just a matter of weeks) due to illness or injury this can clearly have an impact on both their own financial security and the ongoing performance of the business.
As well as the commercial impact of losing a key individual for a period of time (think about the potential impact on customers and suppliers, disruption to ongoing workstreams and projects, plus the additional strain placed on other employees having to undertake unfamiliar tasks in the absence of a key person), the business may find itself facing further cost pressures brought by funding the sick pay, national insurance and pension contributions of the unwell or injured employee who, for the time being, is not able to contribute to the continued success of the business.
For SMEs that want to mitigate some of the financial pressures that might come with supporting a key employee through a period of illness or injury, executive IP is a solution worth considering.
Equally importantly, having cover in place means the impacted individual can focus on their recuperation without being unduly worried about losing their income.
Some executive IP plans may also include access to medical and rehabilitation services to support their recovery.
Safeguarding sick pay for employees
An executive IP policy is arranged, paid for and owned by the life assured’s employer. If the insured employee has an injury or illness and is unable to work, the employer can make a claim.
The policy benefits are paid to the employer (rather than directly to the employee as would be the case with a personal IP arrangement) who then pays the employee via the usual PAYE arrangement, thus the executive IP policy is used to fund the employee’s ongoing sick pay.
There are specific eligibility requirements for executive IP, so understanding both the proposed policy owner and life assured’s circumstances can be key.
To apply, the policy owner must be a business registered and permanently based in the UK, and legally capable of owning an insurance policy.
The individual to be insured must be an employee of the company owning the policy, and have been both a UK resident and registered with a UK doctor for at least two years. Shareholders and directors of limited companies are often also employees of the business and are therefore eligible.
Flexibility
Executive IP policies typically have a level of flexibility that will support nuanced and sophisticated recommendations that truly reflect a client’s circumstance. As well as being able to choose an appropriate level of cover, consumers can opt for a deferred period that is reflective of their circumstances and budget.
