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How does excess work on health insurance?

03rd July 2020

Excess is a common feature of insurance policies. In simple terms, it’s the amount you agree to pay towards an insurance claim (in the event that you need to make one). If you make a claim for £500 and your excess is £100, for instance, your insurance provider will contribute £400 and you will be expected to pay the remainder. 

As the title of this article suggests, private health insurance policies also have an excess. In this post, we examine how they work, and how they affect the price of your premiums. 

 

Applying for health insurance excess 

When you’re applying for private healthcare insurance, you’ll be given the option to include an excess. Each policy has a number of different levels of excess to choose, ranging from zero to £5,000. As we’ll explain shortly, the excess level you choose will have an impact on your monthly or annual premiums. 

 

Paying a health insurance excess 

You pay a health insurance excess after you have made a claim for medical expenses. If your treatment is planned, you notify your health insurance company and they provide you with an ‘authorisation number’. This is required for when you go to your appointment, and allows your healthcare provider to invoice your insurer. 

The insurer will pay their portion to the healthcare provider, and notify you when you need to settle the outstanding amount. This amount is the excess plus any expenses not covered by your policy. 

It’s also worth noting that different policies have different excess conditions. Some will renew automatically on the policy start-date, whilst others renew 12 months following a claim (regardless of policy dates). When considering different policies, we’d always recommend checking the fine detail. 

 

The benefits of health insurance excess 

The main benefit of health insurance excess is that it can decrease your premiums. The higher your excess, the lower your monthly premium. This is because when you have a higher excess, you essentially take on a greater degree of risk. When you have zero excess, the risk is greater for the insurer and they’ll therefore charge you more on your premium. 

To give you an indication of much you’d save – an excess of just £200 is enough to reduce your monthly premiums by around 10%. 

 

Health insurance: Co-payment versus excess 

Having an excess isn’t the only way to reduce your premiums. Another option is what’s known as a ‘co-payment’ plan. Whilst an excess is valid for a certain number of claims within a pre-specified period, a co-payment plan is slightly more flexible. Rather than giving you a set excess, it allows you to split private medical bills with an insurer (usually without a limit on the number of claims). 

Let’s take a look at an example, comparing the treatment of an insurance claim with an excess with that of a co-payment plan.

 

Example 

Situation – A private hospital charges you £5,000 for a small operation. 

With an excess policy – Your excess is £500. You pay £500 to the medical centre and the insurer pays the rest. You’re only allowed one claim per year, and any further expenses will be covered in full by you. 

With a co-payment plan – With your specific plan, you’re responsible for 15% of the charges – £750 in this case. Whilst more expensive, you’re able to make further claims within the policy period and benefit from the insurer’s contribution. 

 

As with any kind of insurance, it pays to be aware of the detail of each policy before making any decision. Failure to do so doesn’t just mean you purchase a policy that’s not best suited to your needs, but could also leave you out-of-pocket if you do need to make a claim. 

 

If you’re considering purchasing private health insurance, get in contact with IMC financial services. Our expert advisors will work with you to understand your specific needs and find the most appropriate policy for you. 

 

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