Double Cover, One Premium: How Executive Income Protection Protects Your Whole Household's Income
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Can one policy protect your salary, your dividends, and the dividends you pay a spouse, all at once? Yes. Executive income protection covers up to 80% of a director's combined salary and dividends, and a non-working shareholder spouse can be insured under the same policy, with their dividends included in the cover calculation. One premium can protect the household's income from the business, not just the director's own. A personal income protection policy can't do this, because it only ever insures the policyholder's own income.
Key Facts
- Executive income protection covers up to 80% of a director's combined salary and dividends, against a typical 60% on a personal policy.
- Whether a personal income protection policy counts dividends varies by insurer, and many base cover mainly on salary.
- A non-working shareholder spouse can be insured under the same executive income protection policy, with their dividends included in the cover calculation.
- Insurers treat the spouse differently: Legal & General can cover a spouse's salary and dividends together, while LV covers the spouse's dividends only.
- Premiums qualify for corporation tax relief, and there's no benefit-in-kind charge for the director, subject to HMRC's wholly and exclusively rules.
What does executive income protection actually cover?
Executive income protection is built specifically for company directors, and covers salary, dividends, and potentially bonuses, up to 80% of the combined total. That's the key difference from most personal income protection policies, which are designed around a single individual's income and typically cap cover at 60%. For a director who takes a modest salary and draws the rest of their income as dividends, that distinction alone can be the difference between a policy that actually replaces their income and one that barely covers a fraction of it.
Can the cover include a spouse's dividend income?
Yes. Where a non-working spouse holds shares and draws dividends from the business, their dividends can be included in the cover calculation and insured under the same policy. How much is included depends on the insurer: Legal & General can cover a spouse's salary and dividends together, while LV covers the spouse's dividends only. That's why it's worth comparing the detail rather than assuming the two are interchangeable.
Does personal income protection cover dividends?
It varies by insurer. Personal income protection insurers assess cover against the policyholder's own provable income, and many put most weight on salary shown on a payslip rather than dividends drawn from a company you own. Even where dividends are taken into account, a personal policy is still typically capped at around 60%, paid from your own taxed income, and only ever covers you, not your spouse. For many company directors, that means a personal policy protects only part of what the household actually takes from the business, regardless of how the rest of their income is structured for corporation tax efficiency.
How can one policy cover your spouse's income too?
In many director-owned businesses, income is shared: the director takes a salary and dividends, and a spouse who holds shares but doesn't work day to day takes dividends too. Both incomes depend on the director being able to work. Executive income protection reflects that: the director and the non-working shareholder spouse can be insured under one policy, and the spouse's dividends count towards the cover calculation.
It's a genuine differentiator from personal income protection, which only ever protects one policyholder's own income and has no way of accounting for a second household income tied to the same business.
Which insurers cover the spouse, and how?
Legal & General and LV are the two leading providers of executive income protection. Legal & General can include a spouse's salary and dividends together, while LV includes the spouse's dividends only. Which one fits best depends on how income is split in your business, so the choice of insurer matters as much as the price.
Double cover, one premium: a worked example
The table below illustrates the difference for a director paying themselves £60,000 in salary and £40,000 in dividends, with a further £20,000 in dividends paid to a non-working shareholder spouse.
| Personal income protection (director only) | Executive income protection | |
|---|---|---|
| Income assessed | The director's own income; whether dividends count varies by insurer | Director's salary and dividends plus the spouse's dividends: £120,000 |
| Typical cover level | Typically up to 60% | Up to 80% |
| Annual benefit if claimed | £36,000 if assessed on salary only | Up to £96,000 |
| Spouse's £20,000 dividend income | Not covered | Included in the cover calculation |
Exact benefit calculations vary by insurer and individual circumstances, this table illustrates the principle rather than a guaranteed outcome. Speak to your adviser to confirm how a specific policy would be underwritten for your business.
Bringing it together
A personal income protection policy only ever replaces part of one person's income. Executive income protection is built to cover the fuller picture: salary and dividends up to 80%, with a non-working shareholder spouse's dividends included under the same policy. The tax treatment works in your favour too: premiums qualify for corporation tax relief and there's no benefit-in-kind charge for the director, subject to HMRC's wholly and exclusively rules. Done properly, it's one premium doing the work that would otherwise take two policies to approach.
Frequently asked questions
Does personal income protection cover dividend income?
It varies by insurer. Many personal policies base cover mainly on salary, and even where dividends count, cover is typically capped at around 60% of your own income and never includes a spouse's dividends. That's why many company directors end up under-insured relative to what the household actually takes from the business.
Can executive income protection cover my spouse if they don't work in the business day to day?
Yes. A non-working shareholder spouse can be insured under the same policy, with their dividends included in the cover calculation. Legal & General can cover a spouse's salary and dividends together, while LV covers the spouse's dividends only.
How much of my income can executive income protection cover?
Executive income protection can cover up to 80% of a director's combined salary and dividends, compared with a typical 60% on a personal income protection policy. The exact percentage offered depends on the insurer and how the underwriting assesses your specific income mix.
Is there benefit-in-kind tax on executive income protection?
No benefit-in-kind charge normally applies to the director, and the premiums qualify for corporation tax relief as a business expense, subject to HMRC's wholly and exclusively rules. This is one of the reasons the policy is usually arranged by the company rather than personally.
Does my spouse need their own policy as well?
Usually not, if their income from the business is dividends or salary that the insurer can include. With Legal & General, a spouse's salary and dividends can both be covered; with LV, only their dividends. Any earned income from outside the business would need separate protection.
This article is for information purposes only and does not constitute financial advice. Tax treatment depends on individual circumstances and may be subject to change. Always seek professional advice before making financial decisions.
Written by
Alex Ogden DipFA | Director | Executive Life
Alex Ogden DipFA holds the Level 4 Diploma for Financial Advisers (DipFA) awarded by the Walbrook Institute London, formerly known as the London Institute of Banking & Finance (LIBF), the FCA's benchmark qualification for retail investment advisers. He is authorised by the FCA, Ref: AJO01072. View the FCA register entry.
Tax rates and thresholds are subject to change.