What Is Contractor Health Insurance? How Much Does It Cost?

Do I Need Private Health Insurance?

In the UK, we’re very lucky to have the NHS. It’s quite rightly a much-loved national institution providing healthcare free at the point of use. The NHS is brilliant, but the reality is that external factors have placed it under unprecedented strain.

For example, government health spending towards the NHS budget has risen at a far slower rate over the past 10 years than it did previously. This has meant a funding squeeze and is one reason why waiting lists are growing.

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

As a contractor, you’re particularly vulnerable to long waiting times. Without sick pay to fall back on, many independent contractors would face a financial crunch if a health condition kept them from their company and the treatment necessary to get them back to work was weeks away.

Contractors tend to choose PMI to minimise disruption to their earnings. By ensuring prompt diagnosis and treatment of health conditions, it cuts the time you have to spend away from work and gets you back up and running as soon as possible.

Joseph Toft
Health & Wellbeing Expert at Drewberry

How Much Does Contractor Private Health Insurance Cost?

As a contractor, the cost of a plan varies depending on your circumstances and the policy options you choose. Major factors that impact the cost of healthcare insurance include:

• Age
• Smoker status
• Current health and medical history
• Location.

To provide you with an estimate of the cost of premiums, we’ve used our calculator to obtain quotes from all the major providers in the UK market. The premiums below are for a contractor who is:

• In good health
• A non-smoker
• Looking for a comprehensive policy with full outpatient cover
• Willing to pay a £250 excess
• Going to be underwritten on a moratorium basis
• Not looking for any additional extras on their policy
• Based in the same postcode as our Brighton office.

How Can I Reduce My Premiums?

To make your plan more affordable, you have a number of options available to cut the cost.

Increase Your Excess

Similarly to car insurance, an excess is the amount you’re willing to pay upfront towards your medical treatment before your policy covers the rest. The higher your excess, the lower your premiums will be.

Excesses typically start at £100 and run all the way up to £5,000 with some providers for certain treatments.

While increasing your excess reduces the cost of a plan, always ensure your excess is affordable should you need to make a claim.

Choose the NHS 6 Week Wait

This cuts the cost of premiums by firstly checking the NHS waiting list in your local area if it becomes apparent you need inpatient treatment. If the NHS wait for that inpatient procedure is less than 6 weeks, you use the NHS for your care.

Only if the wait for treatment is longer than 6 weeks or the NHS doesn’t offer the procedure you need does your Private Medical Insurance kick in.

Consider Your Hospital List

Many insurers offer you a choice of hospital lists to choose from.

The most comprehensive hospital lists cover the top private facilities in the UK (including those in Central London). This is the most expensive option to choose. You have the option to reduce your hospital list to save money, which may see you limited to having care only in local private facilities or private wings within NHS hospitals.

Adjust Your Level of Outpatient Cover

As mentioned, coverage for outpatient care is an optional extra for an additional premium. The cheapest policies won’t provide any outpatient treatment at all.

A comprehensive policy, meanwhile, covers all outpatient treatment in full. However, this is the most expensive option.

There is a happy medium between having no outpatient cover and having everything covered. A mid-range policy offers some level of outpatient treatment, capped at a set monetary amount per policy year. This limit is often £1,000.

A mid-range policy offers you as a contractor cheaper Private Medical Insurance without sacrificing too much in the way of quality of cover.

Can My Limited Company Pay for My Private Health Insurance?

Yes, if you’re a contractor working through your own limited company, your limited company can pay for your Health Insurance. Depending on your circumstances, having the company pay usually offers tax efficiencies over paying for a policy out of your own pocket.

The tax savings result largely from the fact that, when you buy a policy as an individual, you pay using income (e.g. salary and dividend payments) that HMRC has already deducted tax from.

For example, to pay for a £1,200 annual premium from dividend income taxed at the higher rate (32.5%), you’d need to receive a dividend payment of £1,778.

Then, because dividends are paid net of corporation tax, you’d need to generate £2,195 within the company before you could pay yourself the dividends used to buy Health Insurance personally.

Working Through an Umbrella Company

An umbrella company is a third party company that you pay to effectively act as an intermediary between yourself as the contractor and your employer. It’s an alternative to setting up your own limited company.

Umbrella companies do most of the administration for you, including receiving your earnings and paying tax and National Insurance contributions on your behalf before passing net pay on to you.

While some companies may offer insurance, whether or not an umbrella company can pay for a contractor’s Health Insurance is a complicated matter you’re best off discussing with your accountant and your chosen umbrella company.

The expenses you can claim as an employee of an umbrella company are more restricted than is the case when working through a limited company, so it pays to make sure you’re on the right side of HMRC’s rules in this area.

How Does HMRC Tax It?

When your limited company buys Health Insurance for you, the company can offset the premiums against corporation tax.

However, there are other tax implications for both you and the business.

Is It A P11D Benefit?

When a company pays for the policy on behalf of it’s staff, including a limited company paying for contractor medical insurance, HMRC considers it a P11D / benefit in kind. This means you as an individual will have to pay extra tax on the value of the benefit you receive.

This is because, as your company pays premiums with pre-tax earnings and provides it in addition to your remuneration, HMRC effectively sees that as your pay increasing without any subsequent increase in its tax take.

To reclaim the additional tax, HMRC requires employers to either take the owed tax from their employees through their payroll, or declare these expenses at the end of the tax year so HMRC can value and tax them accordingly.

Meanwhile, the business must pay Employers’ National Insurance Contributions at 13.8% on the benefit.

Who Are The Best UK Health Insurance Companies?

There are five major providers in the UK market, each with their own unique products and additional benefits:

• Aviva
• AXA PPP
• Bupa
• The Exeter
• Vitality.

Given each insurer has their own underwriting philosophy, the most appropriate and cost effective option will be heavily dependent on your age and location. It is why it’s so important to compare quotes from all the leading UK insurers when doing your research.

Drewberry searches for premiums from each and every insurer on your behalf. We compare Health Insurance quotes from the entire UK market so you know you’re getting the best deal.

The Importance of Regular Premium Reviews

Health Insurance renews every year, just like car insurance. That means your insurer will write to you on an annual basis laying out your premiums for the coming year.

If you find the cost of cover is creeping up, it’s worth speaking to an adviser to undertake a market review. They’ll take your current circumstances and premiums and go back to the whole market to see if you can get cheaper cover elsewhere.

Assuming you can reduce premiums by switching insurers, your adviser will facilitate this for you. Crucially, by switching you with the correct underwriting, they’ll be able to ensure continuity of cover between providers.

Compare Private Medical Insurance Quotes & Get Expert Advice

Many contractors look for Health Insurance, recognising that it can be a valuable benefit that gets you back to work as quick as possible. However, finding the best policy can be a minefield. With so many benefit levels and policy options that you need to consider, why not ask an expert for help?

Why Speak to Us…

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service when it comes to issues as important as protecting our health. Below are just a few reasons why it makes sense to talk to us.

• There is no fee for our service
• We are independent and work with all the leading UK insurers.
• You’ll speak to a dedicated expert from start to finish
• We are very proud of the 3640 and growing independent client reviews rating us at 4.92 / 5
• Benefit from the protection of regulated advice
• Claims support when you need it most.

If you need to review an existing private medical insurance policy or set-up new cover give us a call on 02074425880 or email help@drewberry.co.uk.