Flagship guide · Limited company directors
Income Protection for Company Directors
Direct answer
Company directors can get income protection, but insurers assess salary, dividends, and sometimes retained profits differently from PAYE employees. The right policy depends on how you take remuneration, whether premiums are paid personally or by the company, and which insurer understands director income at application and at claim stage.
Why directors are different from employees
Employees often have sick pay and a single PAYE figure. Directors choose how profit becomes personal income — and insurers underwrite that choice twice: at application and again if you claim.
- •No Statutory Sick Pay from your own company in most structures
- •Household bills depend on drawings, not company profit on paper
- •Group IP may exist for staff but not cover you as a director
- •Salary and dividend treatment is the core underwriting question
Salary, dividends, spouse dividends & retained profits
| Remuneration | How insurers treat it |
|---|---|
| PAYE salary only | Straightforward — most insurers use your declared salary from accounts or SA302, averaged over 2–3 years. Typical maximum benefit 50–60% for directors. |
| Salary + dividends | Common for owner-directors. Dividends on your SA302 are usually included if consistent over 2–3 years. Spouse dividends paid to a non-working partner are generally excluded from your cover. |
| Low salary + high dividends | Underwriters look for sustainable extraction — not a one-off dividend spike. Some insurers cap dividend inclusion or require accountant confirmation. |
| Retained profits in company | Usually not insurable as personal income unless you regularly draw them. Money left in the company protects the business, not your household bills. |
Spouse dividends: if your partner is a shareholder but not working in the business, their dividends are not added to your benefit. Each director insures their own provable income only.
Insurer differences that matter for directors
This is not a ranked list — it shows where advisers often place director cases and why. Your occupation, health, and income proof determine the right match.
| Insurer | Director fit |
|---|---|
| The Exeter | Strong for professionals and higher earners; flexible on pension-inclusive income calculations; higher absolute benefit limits. |
| LV= | Often competitive for self-employed and directors; may allow up to 55% of provable income; good for dividend-heavy structures with clean accounts. |
| Zurich | Executive and professional propositions; useful where own-occupation wording and long-term payout terms matter. |
| Legal & General | Mainstream option with clear underwriting; reliable for straightforward salary + dividend cases. |
| British Friendly | Mutual insurer with strong service reputation; popular with advisers for trades and smaller limited companies. |
Claim-stage reassessment
At claim, insurers check you are medically unable to perform your occupation (with an own-occupation policy) and that your benefit still reflects income before incapacity.
If your dividends collapsed because you stopped working, a well-documented application prevents the insurer reducing benefit to an artificially low figure. That is why we file SA302 summaries, accountant letters, and consistent remuneration narratives at setup — not just a premium quote.
Red flags at claim: insured income not matching accounts, undeclared spouse routing of dividends, or benefit above combined policy limits across executive and personal cover.
PAYE & dividend examples
Income: £65,000 PAYE salary, no dividends
Typical cover: 60% → £39,000/year (£3,250/month gross benefit)
Simplest director case when all income is salary.
Income: £10,000 salary + £70,000 dividends (3-year avg £68,000)
Typical cover: 50–55% → ~£34,000/year (£2,833/month)
Insurer uses SA302 total; spouse dividends not counted.
Income: Director A: £8,000 + £42,000 dividends. Director B (spouse): £6,000 + £18,000 dividends
Typical cover: Each insures own drawings only — not combined household income
Separate policies; do not double-count shared company profit.
Real-world scenarios (anonymised)
Situation: Software consultancy director: Year 1 £41k drawings, Year 2 £38k, Year 3 £67k after large contract.
Decision: Applied with 3-year average and accountant letter confirming Year 3 was repeatable pipeline income. Insurer accepted £48,667 average rather than excluding the spike.
Outcome: Own-occupation cover to age 65, 13-week deferred, benefit £2,025/month.
Situation: Operations director claimed after back surgery. At application, cover based on £55,000 salary + dividends. In claim year, dividends dropped because they stopped working.
Decision: Insurer reassessed using pre-incapacity income pattern — benefit continued on original insured amount, not reduced to zero-dividend year.
Outcome: Highlight why own-occupation definition and clear application evidence matter more than headline premium.
Situation: Director wanted company to pay premiums for cash-flow reasons.
Decision: Accountant flagged P11D benefit and potential taxable claim. Switched to personal premiums — slightly higher net cost but tax-free payouts.
Outcome: Simpler claim tax treatment; aligned with household need not corporation tax timing.
The directors who struggle at claim stage almost always under-documented how they take income at application. The ones who sail through treated IP like a mortgage application — evidence first, premium second.
We map your remuneration structure before recommending an insurer: PAYE-only, dividend-heavy, retained profit strategy, or executive scheme overlap. That is how you get cover that still pays when it matters.
— Protection adviser, Your Home Finance (FCA-regulated)
General guidance only — not personal advice. Tax treatment of premiums and claims depends on how cover is funded. Confirm with your accountant. Your Home Finance is FCA-regulated; we recommend suitable policies after assessing your circumstances.