How to make an executive income protection claim
If you can’t work due to illness or an injury, you can make a claim on the executive income protection policy held by your limited company.
Contact the insurer once it looks likely that you will be unable to work beyond the deferred period. They will usually ask for details of your health, your work and your earnings to assess the claim.
If the claim is accepted, the insurer normally pays the benefit to your limited company, not to you personally.
When should you contact the insurer?
Don’t wait until the deferred period has finished before starting a claim.
The insurer may need medical or financial information to assess the claim, so it is worth starting the process early.
For example, if your policy has a 13-week deferred period and it becomes clear that you are likely to be off work for several months, contact the insurer during the waiting period rather than at the end of week 13.
The insurer can tell you what information it needs and start assessing the claim.
Our guide to income protection deferred periods for company directors looks at how the waiting period works.
What will the insurer ask for?
The exact claims process varies between insurers, but you will normally be asked for information covering three areas:
- Your medical condition – what has happened, when your symptoms started and what treatment you are receiving.
- Your occupation – what your job involves and why your condition prevents you from carrying it out.
- Your income – evidence of the earnings on which your insured benefit is based.
As this is executive income protection, the insurer may also need information from the company that owns the policy.
What medical evidence is needed?
This depends on the nature of the illness or injury.
The insurer may ask for information from your GP, consultant or another medical professional involved in your treatment.
It will want to establish the nature of your condition, how it affects you and whether you meet the policy’s definition of incapacity.
A straightforward injury with a clear diagnosis may require different evidence from a condition where symptoms have developed gradually or the diagnosis is still being investigated.
The medical information provided when you originally applied for cover may also be relevant. See our guides to executive income protection underwriting and pre-existing medical conditions.
How does the insurer decide if you are unable to work?
A diagnosis on its own does not necessarily mean an income protection claim will be paid.
The insurer considers whether your illness or injury prevents you from working under the definition of incapacity in your policy.
This is why your occupation matters.
Two people with the same medical condition could be affected very differently if one has a desk-based role and the other carries out physical work.
Where a policy uses an own occupation definition, the assessment is based on whether your condition prevents you from carrying out your own occupation, subject to the precise policy wording.
Will you need to prove your income?
Usually, yes.
Income protection is designed to replace part of your lost earnings, so insurers may check your income when you make a claim.
For a limited company director, evidence might include:
- payslips or PAYE records;
- company accounts;
- dividend records or vouchers;
- personal or company tax information; and
- other financial evidence requested by the insurer.
This is particularly relevant where your insured income includes dividends as well as salary.
Insurers do not all treat director remuneration in exactly the same way. Our guide to salary and dividends for income protection looks at this in more detail.
What happens during the deferred period?
You won’t normally receive income protection payments during the deferred period.
How you support yourself during this time depends on your circumstances.
Your company may be able to continue paying you from its existing income or reserves, or you may need to use personal savings.
Once the deferred period has ended and the claim has been accepted, the insurer can begin making payments in accordance with the policy terms.
Who receives the claim payments?
This is one of the main differences between executive and personal income protection.
With executive cover, the limited company normally receives the insurance benefit.
The company can then use the money to continue paying you while you are unable to work.
With personal income protection, the insurer normally pays the benefit directly to the individual.
See executive vs personal income protection for a full comparison.
How are executive income protection claim payments taxed?
The benefit is normally paid to the company and treated as taxable income.
The company can then use the money to continue paying the director or employee, with the usual taxes applying.
With personal income protection, claim payments are normally made directly to the policyholder and are tax-free.
Read our comprehensive guide to how executive income protection payouts are taxed.
How long will a claim be paid?
That depends on the benefit period you selected when the policy was arranged.
A short-term policy may cover a claim for a maximum of one, two, or five years.
Long-term cover may continue until you recover, retire, or reach the policy end date, provided you continue to meet the policy conditions.
If you recover sooner, payments will normally stop when you are able to return to work.
For more information, read how long executive income protection pays out for.
Will the insurer review your claim?
It can do so, particularly where a claim lasts a long time.
The insurer may ask for updated medical information or details about your recovery and ability to work.
This doesn’t mean you make a completely new claim each time. The insurer is checking that you continue to meet the conditions for payment.
How often a claim is reviewed will depend on the medical condition and the insurer.
What if you can return to work part-time?
Some illnesses and injuries allow a gradual return to work rather than an immediate return to your previous hours and duties.
Income protection policies may include provisions for this situation, sometimes described as proportionate or rehabilitation benefits.
These can allow a reduced benefit to be paid where you return to work, but your earnings remain lower because of your health.
The rules vary between insurers, so speak to the claims team before returning to work or changing your duties.
What can delay an executive income protection claim?
Claims can take longer to assess where the insurer is waiting for information.
Common issues include:
- medical evidence still being obtained;
- uncertainty over the diagnosis or ability to work;
- missing company or income records;
- differences between the income insured and actual earnings; or
- information provided at claim stage which needs to be checked against the original application.
Providing the requested information promptly can help the insurer reach a decision sooner.
What if your executive income protection claim is declined?
If an insurer declines the claim, ask for the reason in writing.
It may be that the insurer believes the medical evidence does not meet the policy’s definition of incapacity, that an exclusion applies or that another policy condition has not been met.
If you disagree with the decision, you can make a complaint through the insurer’s complaints procedure.
If the complaint is not resolved, you may be able to refer it to the Financial Ombudsman Service, subject to its eligibility and time limits.
Making a claim – the main steps
- Contact the insurer early rather than waiting for the deferred period to end.
- Complete the claim information requested by the insurer.
- Provide medical evidence where required.
- Provide proof of earnings, including relevant company information.
- Complete the deferred period specified by the policy.
- Keep the insurer updated if your health or ability to work changes.
If the claim is accepted, payments are made according to the benefit level and payment period set out in the policy.