Executive income protection exclusions – what isn’t covered?
Executive income protection provides an income if illness or injury prevents you from working. It doesn’t cover every reason why a director might stop earning.
If you lose a client, have a contract terminated, or experience a drop in your company’s income, you’re unlikely to be able to make a successful claim, especially if you’re still medically fit to work.
An insurer may also exclude particular illnesses or medical conditions from your cover. This will depend on your medical history and the terms you’re offered when you apply.
Does executive income protection cover loss of a contract?
No. This is particularly important for contractors and consultants who work through their own limited companies.
If a client terminates your contract, a project comes to an end or you have a period without work between contracts, you can’t normally claim on executive income protection just because your income has fallen.
You must be unable to work because of an illness or injury covered by the policy.
For example, an IT contractor whose six-month contract ends and who can’t immediately find another assignment wouldn’t have an income protection claim on that basis.
If the same contractor develops a serious medical condition and is unable to carry out their occupation beyond the policy’s deferred period, they may be able to claim.
For more information on cover for contractors, read our guide to income protection for limited company contractors.
Does it cover redundancy?
No. Executive income protection isn’t unemployment or redundancy insurance.
If you lose your job but remain medically capable of working, there wouldn’t normally be a claim.
The same applies to an owner-director whose company no longer has enough work to continue paying their previous level of remuneration.
Does it cover a fall in company profits?
No. A drop in profits or turnover isn’t covered either.
If you’re fit to work but your company has lost customers or had a bad year, executive income protection won’t make up the shortfall.
That’s different from insurance designed to protect the business itself. For more information, read our comparison of executive income protection vs key person insurance.
Are pre-existing medical conditions covered?
An existing medical condition doesn’t necessarily mean you can’t get cover, although it may affect the terms you’re offered.
Depending on your medical history, an insurer might charge more or exclude a particular condition. Someone with previous back problems, for example, could find that one insurer applies a back exclusion while another takes a different view.
Any medical exclusions applied to your cover should be set out before you take out the policy.
For more information on how previous health problems are treated, read our guide to executive income protection and pre-existing medical conditions.
What about conditions that develop after the policy starts?
If a new medical condition appears after you’ve taken out the policy, it can still be covered unless an exclusion already applies to it.
Replacing the policy is different. You’ll go through underwriting again, based on your health at that point, so any medical problems you’ve developed since taking out the old policy could affect the new cover.
Are mental health conditions covered?
Mental health conditions can be covered by income protection, but check the terms of the policy you’re considering.
Your medical history will form part of the application. Previous depression, anxiety or another mental health condition could result in further underwriting or an exclusion.
If the condition is covered and later leaves you unable to work, any claim would be assessed under the terms of the policy.
Are back problems covered?
Back problems can be covered, but any prior back issues are likely to come up during underwriting.
If you’ve had treatment or recurring problems before, the insurer might exclude your back from the policy. Another insurer may look at the same medical history differently, which again highlights the importance of comparing quotes from different insurers.
What if you can work, but not as much as before?
You may still be able to claim if you’re well enough to return to work, but can’t manage the same hours or duties as before.
Some policies will pay a reduced benefit if this means you’re earning less. Exactly how this works varies between insurers and policies.
For more information on how your ability to do your normal job is assessed, read our guide to what ‘own occupation’ means for executive income protection.
Can you claim during the deferred period?
You don’t normally receive payments during the deferred period. It’s the agreed waiting period between becoming unable to work and the point at which benefit payments can begin.
You should contact the insurer when it looks as though your absence may last long enough to result in a claim, rather than waiting until the deferred period has finished.
For more information on the different waiting periods available, read our guide to executive income protection deferred periods.
What other exclusions can apply?
Policies can contain general exclusions as well as exclusions added specifically because of your medical history or circumstances.
Restrictions may also apply to certain activities, occupations or other risks.
Don’t assume that an exclusion you’ve seen on one policy will appear on another. Insurers don’t all offer the same terms, and personal exclusions can also differ following underwriting.
Why the definition of incapacity is important
Receiving a diagnosis on its own isn’t enough to make a claim. What matters is how the illness or injury affects your ability to work.
With ‘own occupation’ cover, for example, the insurer will look at whether you’re still able to do your usual job.
Check this alongside any exclusions, as both will determine when the policy will and won’t pay out.
Check the exclusions before taking out cover
Any exclusions added after underwriting should be set out before you take the policy. Check what they cover, the definition of incapacity, and how much the policy will pay.
For directors and contractors, one distinction is especially important: the policy covers you if illness or injury prevents you from working. It doesn’t cover the company if the work itself dries up.
If you do become unable to work, read our guide to making an executive income protection claim.
If you’re considering executive income protection, a specialist IFA can answer your questions, check the exclusions and terms offered by different insurers and compare quotes from leading providers.