A Contractor’s Guide to Private Medical Insurance

All contractors know the benefits of contracting. Flexible working, an improved work/life balance and being your own boss are just a few of the upsides of being a contractor.

However, it’s not always sunshine and roses. One downside is that contractors don’t get sick pay. Unlike in an employed role, where your company might offer you full pay for a set number of days/weeks per year, contractors have no equivalent. If you fall ill, you’re on your own.

This understandably worries many contractors, who are concerned about what would happen should they be unable to work through illness or injury.

For many, growing NHS waiting lists only compound these concerns. Contractors facing a waiting list of weeks or even months for treatment of a debilitating or painful health condition that’s preventing them from working risk financial calamity.

What is Contractor Health Insurance?

Health Insurance for contractors covers the cost of private medical treatment for eligible conditions. It offers medical care in private hospitals, letting you skip NHS waiting lists and get treatment exactly when you need it the most.

Do I need it?

While we’re incredibly lucky to have the NHS in the UK taking care of our health for free, the reality is that the system is facing unprecedented strain. A combination of a budget squeeze and rising demand for healthcare has pushed up waiting lists.

For example, there were 4.05 million people on NHS waiting lists in England at the end of July 2020. 2.15 million such patients had been awaiting treatment for more than 18 weeks, while 83,203 had been waiting more than a year.

Contractors can rarely afford to spend such long periods off work without sick pay if their condition prevents them from working.

How much does it cost?

The cost of Medical Insurance depends on a variety of factors. These are both personal factors — e.g. your age, smoker status and location — as well as policy factors, such as level of coverage, optional extras and your chosen excess.

This makes it hard to provide exact premiums for individual contractors without knowing a bit more about you.

Can my limited company pay for my health insurance?

Yes, if you’re working through your own limited company it’s possible for the business to pay your Health Insurance premiums. It’s fairly common for contractors to use their company to purchase Health Insurance.

Paying via your limited company will typically offer tax savings on premiums over paying for a policy personally. This is because, when you buy a policy personally, you pay out of post-tax income (that is cash left after HMRC has taken its cut). When you pay for Health Insurance through your business, you pay premiums from pre-tax earnings, so before corporation tax etc. has been deducted.

However, it’s important to note that when you buy Health Insurance this way, it’s a P11D benefit in kind. This means you pay extra income tax as an individual as a result of having cover. Your company will also have to pay Employer’s National Insurance contributions at 13.8% on premiums.

If in doubt about the tax position of paying for Health Insurance through your limited company, speak to your accountant.

What’s the best UK Health Insurance?

There are multiple providers on the market, each offering their own variants of Health Insurance policies. How do you know which is the best to choose?

The answer is complicated, with different insurers and policies suiting each individual contractor differently.

However, broadly speaking, you’ll probably want a policy that offers:

A decent level of outpatient cover, to provide access to tests, scans and procedures not requiring a hospital bed
Access to therapies, such as physiotherapy, osteopathy and chiropractic treatments
Treatment in a good range of private hospitals and clinics.

If you’re not sure exactly what makes a good Health Insurance policy, or which options to choose when you’re setting up cover to tailor your plan to your circumstances, you may benefit from independent, expert advice.