Permanent health insurance, usually shortened to PHI, is the long-standing UK insurance industry name for what is now sold as income protection insurance. It pays a regular monthly benefit — typically 50–70% of gross earnings — if illness or injury stops you working, continuing until you return to work, the benefit period ends, you retire, or you die. The word ‘permanent’ refers to the fact that the insurer cannot cancel the policy or re-underwrite it while premiums are paid — not to the payments being permanent.

Yes — permanent health insurance and income protection are the same product under two names. PHI is the older, more technical term still used in employment contracts, group scheme documents and by HR departments; income protection is the consumer name used in most modern marketing. If your employment contract mentions PHI, it is referring to an income protection arrangement.

No — and this is the most common confusion around the term. Private medical insurance (PMI) pays for private healthcare: consultations, diagnostics and treatment in private hospitals. Permanent health insurance replaces part of your income when you cannot work. One pays hospitals; the other pays you. They can complement each other, but they answer completely different risks, and having one does not provide the protection of the other.

UK PHI policies typically pay 50–70% of gross earnings as a monthly benefit. Payments begin after a deferred period chosen at outset — commonly 4, 13, 26 or 52 weeks — with longer deferred periods producing cheaper premiums, since the policy takes over after sick pay ends. Benefits continue until return to work, the end of the chosen benefit period, retirement age, or death, whichever comes first. Policies can be ‘full term’ (paying to retirement if needed) or limited-payment versions that pay each claim for a maximum of one to five years.

In a group PHI scheme the employer owns the policy and pays the premiums. If an employee is too ill to work beyond the deferred period, the employer claims; the insurer pays the benefit to the employer, which passes it to the employee through payroll as salary continuance. Cover is typically capped around 70% of salary or lower, terms are set for the whole workforce rather than individually, and cover ends when the employee leaves the company — group PHI does not usually move with you to a new job.

It depends on who pays the premiums. For an individual policy you fund yourself from taxed income, benefits are paid tax-free with no National Insurance, though premiums attract no tax relief. For an employer-funded group scheme, premiums are usually an allowable business expense for the employer and are not normally treated as a P11D benefit in kind for the employee — but claim payments are passed through payroll and taxed as earnings, with income tax and National Insurance deducted. Tax rules can change; HMRC guidance and a qualified accountant are the authoritative sources for a specific situation.

During a long-running PHI claim, an insurer may offer to replace the ongoing monthly benefit with a one-off lump sum payment that ends the claim and usually the policy. The offer reflects the insurer’s estimate of the claim’s future cost, discounted. Accepting is permanent: the monthly income stops, and the settlement can also affect means-tested state benefits. Because the trade-offs are significant and individual, this is a decision where regulated independent financial or legal advice is the appropriate source of guidance before responding to any offer.

Not automatically — it depends on the scheme’s terms and your circumstances. Points people compare: group cover ends when you leave the job, and a health condition developed while employed may then be excluded from a new personal policy; group benefit caps may replace less income than you need; and some schemes pay each claim for a limited number of years rather than to retirement. Some people rely on the group scheme alone, others hold a personal policy alongside or instead. An FCA-regulated adviser can assess a specific situation — this guide describes the landscape rather than recommending an arrangement.