Why Income Protection Should Be Non Negotiable for a Company Director

You protect your business with insurance, your staff with contracts and your customers with guarantees. But what about your most important asset, your ability to earn?

As a company director, your income may be flexible, tax efficient and tied to the performance of your business. But that same flexibility can leave you exposed if illness or injury stops you working. Income Protection is not just a nice to have,  it is a cornerstone of financial security.

In this post, we will explain why Income Protection should be a priority for directors and how to structure it properly.

What Is Income Protection?

Income Protection is a long term insurance policy that pays you a monthly income if you are unable to work due to illness or injury.

• It typically pays up to 65 percent of your gross income
• Payments start after a chosen deferred period, usually 4, 8 or 13 weeks
• It can continue to pay out until you return to work, reach retirement or hit a fixed end date

This makes it very different from critical illness cover or life insurance. Income Protection is designed to support your everyday financial needs over time — not just offer a one off lump sum.

Why It Is Essential for Company Directors

As a director, you face unique risks and income structures. Here is why Income Protection should be part of your core financial plan:

◆ Your business does not protect you personally
If you are off work, your company may not be able to keep paying your salary or dividends. Even if it can, that income could dry up quickly if revenue falls or clients leave.

◆ Statutory Sick Pay is not enough
If you pay yourself via PAYE, the statutory sick pay is just over £100 per week, and even that only lasts 28 weeks. For directors paid mostly through dividends, there may be no entitlement at all.

◆ Your personal expenses do not stop
Mortgage payments, household bills and family costs continue whether you are earning or not. Without protection, you may need to rely on savings or borrow money just to cover basics.

◆ Recovery can take time
Serious illness or injury is not always short term. Income Protection offers support for as long as you need it, months, years or even to retirement age.

Structuring the Right Policy

• Base it on your actual income
  You can cover your PAYE income or a mix of salary and dividends depending on how your accountant structures your pay. Some providers are more flexible than others.

• Choose an appropriate deferred period
  The longer the wait before payments begin, the lower the premium. Balance this with how long your savings or company could support you in the short term.

• Decide between personal or business paid cover
  Company directors can take out policies personally or via their limited company. A business paid policy is often more tax efficient, with premiums usually treated as an allowable business expense.

• Add features that support your lifestyle
  Some policies include additional benefits like rehabilitation support, access to private GPs, or mental health services, all valuable if you are recovering or trying to return to work.

What Does It Cost?

Premiums vary depending on:

• Your age and health
• Occupation and lifestyle
• The level of cover and benefit period
• Whether the policy is guaranteed, reviewable or age based

For many directors, a tax efficient company paid policy can cost less than expected, especially compared to the financial risk of going without cover.

Final Thoughts

As a company director, you take calculated risks every day, but losing your income should not be one of them. Income Protection is not a luxury. It is a financial safety net that protects your lifestyle, your family and your future.

At Versed Financial, we specialise in helping directors and business owners put the right protection in place. Whether you want cover through your business or personally, we will help you find the right fit with no unnecessary costs.

Want to protect your income like you protect your business?

Speak to us today for a complimentary strategy call with Versed Financial and let us help you secure a policy that keeps life running even when work stops