Legal & General Executive Income Protection [REVIEW]

Who Are Legal & General?

Sergeant John Adams and five other lawyers founded Legal & General in June 1836. Today, Legal & General Group is a multinational financial services company with its headquarters in London.

It offers investment management, pensions, annuities, Life Insurance, Income Protection and more.

Legal & General is a public limited company (PLC), with a primary listing on the London Stock Exchange. It’s also constituent of the FTSE 100 Index.

L & G’s Executive Income Protection plan is relatively new to the market, released in 2020 and aimed at insuring company directors, contractors and those in similar roles.

It’s a good policy and the premiums compare favourably with other Executive policies on the market.

Michael Barrow
Independent Protection Expert at Drewberry

Legal & General’s Executive Income Protection

This policy is simply know as Legal & General Executive Income Protection.

Policy Overview

L&G’s Executive Income Protection policy is designed to be bought by an employer for an employee. Alternatively, a business owner can purchase the policy to cover themselves.

It’s therefore especially attractive for consultants and contractors operating through their own limited company.

• The policy provides a tax-efficient way to arrange Income Protection, with the premiums not typically being a P11D benefit for the employee.
• Executive Income Protection covers up to 80% of earnings, which is one of the highest levels of cover available in the UK. However, as a company-owned policy, the payout is subject to tax.
• The policy can also cover employee National Insurance and pension contributions, subject to limitations, so the employer can continue to meet these obligations in the event of a claim.
• A range of limited payment term options allows you to reduce premiums by limiting your claims duration.
• The policy provides own occupation cover, so it pays out if the claimant can’t do their specific job. This is opposed to other definitions, such as suited occupation or activities of daily living.

Documentation

What Does Legal & General’s Director Income Protection Cover?

Legal & General’s Executive Income Protection offers broad coverage with a high maximum benefit.

Key Benefits

Cover Specifically for Company Directors

As mentioned, this policy is aimed specifically at company directors, contractors and executives operating through limited companies. While this means you must have a limited company to benefit from it, it does mean the policy is specifically tailored to the needs of such individuals.

High Monthly Benefit

Legal & General’s maximum annual benefit of £300,000 or £25,000 pre month (£210,000 per year or £17,500 per month if you select increasing cover) means that it’s suitable for very high earners.

Proportionate Benefit

If you can only return to work after an illness / injury in a reduced capacity with fewer responsibilities and lower pay, Legal & General pays a proportion of your monthly benefit taking into account the market salary that you would otherwise receive for undertaking that role and responsibilities.

Automatic Waiver of Premium

Legal & General stops taking premiums from you in the event of a claim as soon as you start receiving your benefit.

Increasing Cover Available

To protect your monthly benefit from inflation, Legal & General offers increasing cover. Your premiums will increase in line with inflation as measured by the Retail Prices Index (RPI), up to a maximum increase of 10% per year.

Your premiums will also increase by the change in RPI multiplied by 1.5 to compensate, up to a maximum increase of 15%.

Additional Benefits & Services

These are the benefits available when you take out a L&G Executive Income Protection policy. Some are free, while others are optional extras for an additional premium that you can add to your policy.

Continuation Cover

If you are moving employers, Legal & General can transfer the policy to the new employer, who will take over the payment of the premiums. You can only use this up to 90 days after the employer change and up until your 50th birthday.

Employers National Insurance Contributions

This additional cover can help fund employer’s NICs that the business will incur when passing the claim payment to the employee as sick pay.

When you choose this, Legal & General determines the level of cover from the outset based on present national insurance rates and thresholds. In the event of a claim, Legal & General pays either this amount or £42,500 p/a, whichever is less.

Employer Pension Contribution

This additional cover funds the cost of pension contributions that the business will continue to make on behalf of the employee in the event of a valid claim.

When you choose this option, Legal & General pays the lower of the level of cover requested, one third annual earnings, the average of employer pension contributions paid during the prior 3 years or £40,000.

Inflation Protection

Offers the option to protect your cover against inflation by linking it to RPI.

Rehabilitation Services

Legal & General’s rehabilitation support provides access to specialist services to help successful claimants return to work. You get access to this at no additional cost. The dedicated team of healthcare professionals includes trained nurses, physiotherapists and occupational therapists.

RedArc Nurse Support Service

Advice and support from qualified nurses on:

• Medical treatment
• Coping strategies and bereavement
• Second medical opinions
• Mental health support
• Help at home after a hospital stay
• Eldercare.

Key Comparison Points

Not Available to Individual Clients

L&G’s Executive Income protection is purchased through the policyholder’s place of employment. It cannot be purchased as a standalone personal protection product, but business owners can use their company to purchase a policy for themselves.

Maximum Coverage of 80% of Income

The maximum level of cover for this policy is 80% and capped at £300,000 per year in benefits, which is higher than the typical maximum for Income Protection policies.

However, because the company owns the policy, the payout would be paid out to a claimant through payroll and is therefore taxable. Even if you are a shareholder and you draw the benefit as a dividend, your benefit will still be subject to tax.

Offers Cover for Spouse’s Salary and Dividend Income

Unlike some Income Protection policies, Legal & General’s Executive Income Protection Insurance also allows the employee to insure any salary and dividend payments made to their spouse or partner in certain circumstances.

Own Occupation Cover Only

Legal & General will use your occupation as a deciding factor when pricing your policy. This means that workers in higher risk occupations may find themselves paying more for a policy or declined cover.

Shortest Deferral Period is 4 Weeks

Legal & General’s shortest deferral period is 1 week.

Other insurers offer deferral periods of 1 week or even 1 day. If you need a shorter deferral period, perhaps because you don’t get much sick pay and have little in the way of savings, another insurer may be a better option.

Limited Additional Benefits

While Legal & General includes some free additional benefits, such as its Rehabilitation Support and nurse helpline, it doesn’t have any many free services or additional paid options as some other providers.

Compare Income Protection Quotes & Get Expert Advice

As you can see, there are a lot of points to consider when comparing insurers. With so many factors in play, especially if you’re looking for cover for company directors, it can be time-consuming to compare information from every insurer in the market.

Why not ask an adviser for help?

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For help and fee-free advice on Income Protection, please don’t hesitate to get in touch. You can reach us on 02084327333 or email help@drewberry.co.uk.