Can you increase your executive income protection cover?
If your income has gone up since you took out executive income protection, you may also be able to increase the amount you’re insured for.
This could apply if you’re now taking a higher salary or larger dividends from your company. You may also have a policy where the benefit can increase automatically over time.
Why might you want to increase your cover?
If you took out your policy several years ago, there’s a good chance your income and household costs aren’t the same as they were then.
A monthly benefit that covered a reasonable proportion of your income when you bought the policy may now leave a much bigger shortfall.
For more information on choosing a benefit level, read our guide to how much executive income protection you need.
Can you simply ask the insurer for more cover?
Yes, but the insurer may want to check your circumstances again before agreeing to the increase.
You’ll usually need to show that your earnings support the higher benefit. You could also be asked about your health or occupation, particularly if you’re asking for a substantial increase.
Any extra cover won’t necessarily be provided on exactly the same terms or at the same price as your existing cover.
See our guide to executive income protection underwriting for more information on what you may be asked for.
What if your salary or dividends have increased?
Company directors often change how much they take from the business as it grows. Your salary may have increased, you may be taking larger dividends, or both.
If your salary or dividends have increased, you may be able to increase your monthly benefit.
Insurers have different rules for director income, especially dividends. You may be asked for recent accounts or other evidence of your earnings before the insurer agrees to the increase.
Read more in our guide to salary and dividends for executive income protection.
Can you increase cover without further medical underwriting?
Some policies allow you to increase the benefit after certain events without having your health reassessed.
There will normally be rules around when you can do this and how much the benefit can increase. You’ll probably still need to show that your earnings can cover the extra cost.
This can be useful if your health has changed since you originally took out the policy.
Check your existing policy to see whether you have this option and how it works.
What is index-linked executive income protection?
If your monthly benefit stays fixed for many years, inflation will gradually reduce what that money can buy.
Some executive income protection policies can increase the benefit each year. The increase may be linked to inflation or another rate set out in the policy.
This gives the cover some protection against rising prices without you having to apply for an increase every few years.
Does the premium increase when the cover increases?
Yes, you should expect to pay more if the amount you’re insured for increases.
How much more depends on the policy and the type of increase. An annual index-linked increase, for example, may be calculated differently from extra cover you apply for after a large increase in earnings.
See our guide to guaranteed, reviewable and age-banded executive income protection premiums.
Do you have to accept an automatic increase?
Not always. If your policy offers an automatic increase, you may be able to decline it if you don’t want the extra cover or a higher premium.
Check the terms before doing so. Some policies place restrictions on future increases if you’ve previously declined them.
What if you already have the maximum cover?
There’s a limit to how much of your income an insurer will protect, so earning more doesn’t necessarily mean you can increase the benefit by the same amount.
The insurer will also take account of other income protection you already have when working out how much additional cover it can offer.
If you have more than one policy, see can a director have more than one income protection policy?
What if you need substantially more cover?
If you need a much larger benefit than you currently have, the insurer may want to review your earnings and circumstances again.
You could also compare the cost and terms of increasing your existing policy with taking out additional cover elsewhere.
Be careful about giving up an older policy if your health has changed. A new insurer will assess you based on your health now, and you could end up with exclusions or terms you didn’t have before.
Our guide to executive income protection and pre-existing medical conditions covers this in more detail.
How often should you review your cover?
You don’t need to review your cover every time your income changes.
If you’re now taking substantially more salary or dividends than when you bought the policy, check whether the monthly benefit is still sufficient for you.
You should also review the cover if your role changes significantly or you start paying yourself differently.
If you want to increase your executive income protection, a specialist IFA can check what your existing policy allows and compare the alternatives available from other insurers.