Health Insurance Excess Explained

Roman Danaev

19 December 2024

When you’re shopping around for private health insurance, one of the key decisions you’ll face is choosing your excess amount. What you might not understand, though, is that this choice will have a big impact on the cost of your policy. In this article, we’ll break it all down.

What Is Health Insurance Excess?

Private health insurance excess is the amount you’re required to pay towards your claim. This amount is decided when you first take out or renew your policy, but how it’s applied varies depending on the provider and the policy terms.

The excess is paid once per insured person at the start of their first claim during the policy period. For example, if two people on the same policy both make a claim, each will need to pay the excess. However, after that, they won’t need to pay another excess for additional claims until the next policy renewal.

How Does a Health Insurance Excess Work?

When you sign up for a policy, you’ll decide how much excess you’re comfortable with. This could range from £0, where the insurer covers all of your medical costs, to as high as £5,000, depending on your provider and the treatments you might need.

Here’s how health insurance excess works when your excess is £200:

• If your treatment is £100, the insurer will not pay anything because the claim amount is lower than the excess, and you’ll pay the full treatment cost.
• If your claim is £200, you’ll pay the full amount.
• If your claim is £1,000, you’ll pay £200, and your insurer will cover the remaining £800.r

Choosing a £0 excess means you won’t have to pay anything out of pocket for your healthcare, but it also comes with higher premiums. Essentially, the more the insurer covers, the more you’ll pay each month for the peace of mind that comes with it.

Can I Choose My Health Insurance Excess Level?

Yes. When you sign up for a health insurance policy, you’ll have the option to choose the level of excess that suits you. Typically, it starts around £50-£100, but you can opt for higher amounts, up to £1,000 or even £5,000, depending on what works best for your budget. It’s quite rare to find insurance providers that don’t offer some form of excess at all.

Why Would You Pay an Excess?

An excess is a standard part of many health insurance policies (as well as car, home, pet, or travel coverage)— regardless of who’s to blame for the issue. From the insurer’s side, it helps cut down on small claims and saves them time and resources. For you, it’s a smart way to save money with lower premiums.

How Is Health Insurance Excess Paid and When?

When you make an eligible claim for treatment, you’ll need to cover your excess. This payment might go directly to your health insurance provider, or it could be paid to the treatment provider, such as your doctor, hospital, or clinic.

Once your excess is taken care of, your insurer covers the rest up to the agreed limit for that treatment. Here’s an example to illustrate:

1. You’ve been experiencing some troubling symptoms, so your GP recommends seeing a specialist for further tests and a detailed diagnosis.
2. After notifying your insurer, they confirm that your excess is £150.
3. The total cost for the appointment and tests comes to £850.
4. The insurer confirms that everything falls within their benefit limits and pays £700 directly to the provider. You pay your £150 excess, and the insurer covers the rest.

It’s also worth noting that some benefits, like dental care, might not require an excess payment. In any case, you should always read your policy conditions carefully.

Which Excess Amount Is Right for You?

The policy excess you select plays a big role in determining your monthly premium. It’s tempting to go for a higher voluntary excess to keep your monthly costs lower, but you should find a happy medium.

Be mindful of how much you’re willing to pay in case of a claim. Even though it’s hard to predict when you’ll need medical care, you should choose an excess that you feel comfortable paying at any time without putting yourself in a financial bind. For many people, this means sticking to the lower end of the excess options.

If your provider has a compulsory excess, then that amount will automatically be added to your policy, regardless of your preferences.

Can I Change My Excess?

Most insurers won’t let you change your policy until it’s time for renewal. If you’re not happy with your current excess, you can usually adjust it when your policy renews. However, you should contact your health insurer or speak with a broker to see if they’re willing to make changes before then. You might find they’re more flexible than you think.

Sometimes, you can increase it from the lowest to the highest amount, but reducing it is a bit more limited. For example:

Your insurer offers a range of excess amounts: £50, £100, £200, £350, £500, and £750. In the first policy year, you choose the £50 excess. In the new policy year, you decide to increase it, and your policy lets you raise it to the maximum of £750.

However, once you’ve increased your excess to the highest amount, you can’t easily lower it back to the minimum. Some policies only allow you to reduce it by one or two levels. So, if you want to lower your excess at renewal, you could go from £750 to £500 or £350, but not all the way back to £50.

What Is the Benefit of a Health Insurance Excess?

The main benefit of choosing an excess is that it lowers your premiums. The higher the excess, the less you’ll pay each month. This gives you more control over your policy and lets you decide how much you’re comfortable paying when you make a claim.

Another advantage is that for smaller claims, you pay a little upfront, but you’re still covered for larger treatment costs.

Should I Add an Excess to My Private Medical Insurance?

Choosing a higher excess is a smart move in certain situations, especially if you:

• Are young and healthy
• Have no history of hospital stays
• Don’t anticipate needing medical treatment anytime soon
• Feel confident you can cover the excess upfront if a claim arises

That said, there are times when a lower or no excess makes more sense. Consider it if you:

• Have ongoing health concerns, as a lower excess can reduce the financial burden if treatment is needed
• Have a track record of hospital claims
• Expect to need hospitalisation in the near future
• Don’t have the savings to comfortably cover a higher excess

Final Words

So, that’s it for excess. It’s not a complicated topic, but it’s definitely something you should take seriously when choosing your insurance. Try to be reasonable when deciding on the amount — it should be something you’re comfortable paying out of pocket if needed.