Private medical insurance for limited company owners: is it worth it?

With NHS waiting lists still under pressure, private medical insurance looks increasingly attractive, especially if you’re in business for yourself.

Having the option to go private means you may be able to receive treatment faster and return to work sooner if you fall ill.

Plus, if you employ staff, it’s an attractive perk to offer them.

But is private medical insurance worth the cost? And, if so, what’s the most tax-efficient way to pay for it as a limited company owner?

In this post, we’ll take a look at:

• What a typical medical insurance policy does and doesn’t cover
• Whether it’s worth buying a private medical insurance policy
• The pros and cons of paying for it through your limited company and out of your own pocket

What does private medical insurance cover?

There are several different types and levels of private health cover:

1. Private health insurance

If you’re considering getting private medical insurance, this is probably the type of policy you’re thinking of.

Private health insurance covers the cost of private medical treatment if you get sick, and it typically includes some combination of:

• Inpatient cover, which pays for treatment where you need to stay in hospital
• Outpatient cover, which pays for doctors’ and consultants’ appointments, tests, and other care that doesn’t require a hospital stay
• Day-patient cover, which pays for treatment where you’re admitted to hospital but don’t need to stay overnight

The vast majority of private health insurance policies cover only acute conditions: illnesses or injuries that can be treated and are expected to improve within a reasonably short period, such as bronchitis or a broken bone.

That said, levels of cover – and, so, the cost – can vary widely.

The cheapest policies cover a limited number of treatments and may cap payouts. For example, a policy might pay out up to a set amount, and you’d need to pay for treatment over that limit yourself.

The most expensive policies can offer much broader cover, including specialist cancer care and mental health support.

2. Diagnostics cover

This type of policy covers the doctors’ and consultants’ appointments and tests you need to determine the cause of your symptoms, but not the cost of treatment.

It’s useful for getting a quick diagnosis and is cheaper than full private health insurance. But once you find out what’s wrong, you’ll normally need to use the NHS or pay for treatment yourself.

3. Health cash plans

Health cash plans give you money back on some of your health care costs, up to a certain limit.

They can cover:

• Eye tests and dental check-ups
• The cost of health screenings
• Some prescription costs
• Hospital parking charges
• Physiotherapy

What about critical illness cover?

Critical illness cover is a separate type of insurance rather than private medical insurance.

It pays out a one-off lump sum if you’re diagnosed with one of the serious illnesses covered by the policy.

Critical illness policies are sometimes confused with life insurance. But, while most policies only cover serious or life-altering conditions – such as certain cancers, strokes or heart attacks – they pay when you’re diagnosed, not when you die.

You don’t necessarily have to use the payout to pay for medical care, either. The money is yours to use as you see fit.

You can find out more in our guide to critical illness cover for directors.

What private medical insurance does NOT cover

Private medical insurance doesn’t usually cover:

1. Chronic conditions

These are illnesses that require ongoing management, such as diabetes or asthma. Some policies will, however, cover acute flare-ups which can be treated and brought back under control.

2. Pre-existing conditions

These are illnesses or symptoms you had before buying the policy. Policies commonly deal with pre-existing conditions in one of two ways:

i) Moratorium underwriting

With moratorium underwriting, you don’t normally have to provide your full medical history when you take out the policy.

Instead, conditions you’ve recently suffered from are excluded initially. They may become eligible for cover later if you remain free from symptoms, treatment, medication and medical advice for a specified period – commonly two years, although the exact terms vary between insurers.

ii) Full medical underwriting

You’ll need to provide a full medical history before your policy is issued, and the insurer will tell you which existing conditions are excluded from cover.

The main advantage is greater certainty from the outset about what is and isn’t covered. The insurer has already assessed your medical history rather than doing so when you make a claim.

The flip side is that exclusions placed on pre-existing conditions may remain for the duration of the policy.

Other common exclusions include:

• Treatment for alcohol and drug addiction
• Cosmetic surgery, fertility treatment, and other non-essential medical care
• Most pregnancy and maternity treatment
• Accidents and medical emergencies requiring A&E treatment

Is private medical insurance worth the extra cost?

The simple answer is: it depends on your reasons for buying it.

Private medical insurance can help you be seen faster than the NHS. Depending on the condition, insurer and availability, you may be able to see a specialist or arrange diagnostic tests within days.

In England, the NHS standard for non-urgent consultant-led treatment is a maximum wait of 18 weeks, although actual waiting times vary considerably. You can check the latest guidance on the NHS website.

Private medical insurance can also give you more flexibility and convenience.

You may be able to book appointments at times that suit you, choose between available hospitals and consultants, get a second opinion more easily, and access some treatments which aren’t readily available through the NHS.

Many private hospitals’ rooms also look more like hotel rooms than hospital rooms. They’re nicer and comfier (and the food tastes better).

That said, it’s important to note that private medical insurance is complementary to NHS care, not a replacement for it.

If you’re in an accident or suffer a serious, life-threatening emergency, you’ll normally need to go to A&E, because private hospitals generally aren’t set up to provide emergency trauma care.

Similarly, if you live with a chronic condition, tend to get sick with the same illness repeatedly, or need treatment your policy doesn’t cover, you’ll need the NHS unless you can afford to pay for private care yourself.

Of course, you’re still entitled to use NHS care if you have private medical insurance. If you can afford it, buying a private medical insurance policy can offer the best of both worlds.

Should you buy private medical insurance via your limited company or pay for it personally?

Private medical insurance paid for by your company can normally be treated as an allowable business expense for Corporation Tax purposes.

By contrast, if you pay for the policy personally, you usually do so from post-tax income. There is no general personal income tax deduction for private medical insurance premiums.

Many insurers also have private medical insurance products designed for businesses. These can sometimes be better value than products aimed at individual customers.

Importantly, however, it’s not all black and white.

Because private medical insurance benefits you personally, HMRC normally considers company-paid cover to be a benefit in kind.

As a result, if you pay it through your limited company:

• You will normally pay income tax on the value of the benefit
• Your company will normally pay Class 1A National Insurance on the benefit – 15% for the 2026/27 tax year
• The benefit must be reported to HMRC in the appropriate way, typically through payroll or on a P11D

The company can normally deduct both the qualifying insurance premium and the associated Class 1A National Insurance cost when calculating its taxable profits.

You can read HMRC’s guidance on medical treatment and insurance benefits.

It’s worth crunching the numbers to see which option would work out cheaper for you.

If you take a small salary and the rest of your income as dividends, paying for private medical insurance through your limited company may still be more tax-efficient than paying for it personally.

If, on the other hand, the additional benefit pushes more of your income into a higher tax band, the advantage may be reduced.

Your accountant can advise you about the best way to pay for private medical insurance based on your circumstances. There are also ways to reduce the premium and make it more affordable.

In particular:

Consider limiting your cover only to what you need

There are several ways to go about this. You could:

• Only buy the level of outpatient, diagnostic and treatment cover you’re likely to need
• Reduce your list of in-network hospitals – the hospitals where you can receive treatment. Unless you travel all the time, you’re unlikely to benefit from having the option of being treated at hospitals that are hundreds of miles away from your home, so this is a relatively painless way of bringing costs down
• Choose a ‘guided’ policy – a policy where the insurer gives you a more limited choice of hospitals or consultants

Consider a policy with a 6-week wait option

These are policies where private inpatient or day-patient treatment is only available if the NHS cannot provide the treatment within the period specified by the policy, commonly six weeks.

Choose a higher excess

This is the amount you agree to pay towards treatment before, or alongside, the insurer’s contribution. A higher excess will normally reduce your premium.

Needless to say, there’s a balance to be struck here. You’ll want the excess to be high enough to make a difference to your premium, but not so high that it defeats the purpose of buying private medical insurance in the first place.

Final word… and a bonus tip

While not a substitute for NHS care, private medical insurance can give you more flexibility, more choice, and the peace of mind that you may be able to avoid a long wait for treatment should you get sick.

The catch is that, depending on the level of cover you want, it can come at a high cost. Which is why you should weigh your options, shop around, and work out the best way to pay for it.

It’s also worth thinking carefully before switching insurer.

Moving to another provider can affect the way existing or previously claimed-for conditions are treated, although some insurers offer switch arrangements which preserve existing underwriting terms.

More to the point, premiums tend to rise as you get older, so a cheaper deal isn’t necessarily better if it comes with less favourable cover or new exclusions.

With this in mind, it’s worth doing your homework.

Alongside the right cover and price, choose a company with a reputation for quality and good customer service.

Find out more about private medical insurance

Our partner, Broadbench, provides independent financial advice to limited company directors and can help you find affordable, high-quality health cover for you, your family, and any employees.

They have helped hundreds of our visitors over the past five years.

Complete the form and their team will be in touch shortly.