Calculating the cost of your health insurance excess

The concept of excess is often the most misunderstood part of any insurance policy, but it’s quite simple really. In essence, the excess stated in your policy is the amount of any claim you have to pay before your insurance provider pays out.

Many people question why they have to pay an excess at all, given they’ve regularly paid a premium in order to be fully covered when they need to be. The answer is that some policies don’t have an excess attached, but they tend to have higher premiums as a result.

Your choice

As a general rule, the lower the excess value, the higher your regular premium payments and vice versa. Of course, other factors come into account, but if you’re unlikely to claim very often then you might want to choose a higher excess to keep your premiums down.

However, if your excess is high, a situation could arise where it’s simply not worth making a claim because the excess might exceed the total settlement figure. If you’re likely to claim often, you may want to consider paying a higher premium in return for a smaller excess (although frequent claims are likely to increase your premium anyway).

Health claims

This matter comes into sharp focus when discussing private health insurance. Here the way excess works varies according to the type of policy. It may run for one calendar year, regardless of how often you claim, or it may run for a year from the date of your first claim. The excess is paid by the insured party directly to the healthcare provider, with the insurance company paying the balance.

Imagine your excess for the year is £100. If your first treatment costs that much or more, you’ll pay £100 and the rest of your treatment – including further treatment for the rest of the year – will be covered by your policy.

If your first round of treatment costs £50 then you’ll pay that and also the first £50 of your next lot of treatment until you’ve contributed £100 in total. At this point, your insurance kicks in and pays for the rest. But it will “reset” after a year, regardless of how much you paid or claimed in the previous year.

Spreading the cost

Older people, or those with an ongoing condition, may choose to pay higher premiums in return for a policy with low or no excess. Essentially they’re spreading the cost of unavoidable treatment so they won’t be hit with an unexpected bill.

For help getting your head around insurance terminology and private health insurance, call Alan Boswell Group today on 01603 218000.