TL;DR
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands that navigating the world of private medical insurance (PMI) in the UK can feel complex. Two terms that often cause confusion are 'excess' and 'co-payment', yet understanding them is key to controlling your costs. Clear guidance on these two policy features and how they affect claims and savings When you choose a private health insurance policy, you are entering into a partnership with your insurer.
Key takeaways
- Consultation & Scans (illustrative): You see a consultant and have an MRI scan. The total bill for this is £1,200.
- Paying the Excess (illustrative): You are responsible for paying the first £250 of this bill. You might pay the hospital directly, or your insurer will pay the full amount and then ask you to reimburse them for the £250 excess.
- Insurer Pays the Rest (illustrative): Your private medical insurance provider then covers the remaining balance of £950 (£1,200 - £250).
- It’s a fixed sum: You know exactly how much you'll need to contribute (£250 in our example).
- It’s paid first: The excess is your initial contribution before the insurer's cover kicks in.
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands that navigating the world of private medical insurance (PMI) in the UK can feel complex. Two terms that often cause confusion are 'excess' and 'co-payment', yet understanding them is key to controlling your costs.
Clear guidance on these two policy features and how they affect claims and savings
When you choose a private health insurance policy, you are entering into a partnership with your insurer. While they agree to cover the bulk of your medical bills for eligible treatment, most policies include cost-sharing features. This is where you, the policyholder, agree to contribute a portion of the cost.
The two most common ways this happens are through an excess and a co-payment.
Think of them as tools that allow you to fine-tune your policy. By agreeing to pay a little more when you claim, you can significantly reduce the amount you pay every month in premiums. This article will break down exactly what each term means, how they work in the real world, and how you can use them to your advantage to find the perfect balance between comprehensive cover and an affordable price.
What is an Excess in Private Health Insurance?
An excess is one of the simplest and most common features of any insurance policy, whether it's for your car, home, or health.
A Simple Definition of Excess
An excess (sometimes called a deductible) is a fixed, pre-agreed amount of money that you must pay towards a claim before your insurance provider starts to pay.
You choose the excess level when you take out your policy. Common options in the UK PMI market include £0, £100, £250, £500, £1,000, or even higher. The golden rule is straightforward: the higher your excess, the lower your monthly premium will be. (illustrative estimate)
How Does an Excess Work in Practice?
Let's imagine you have a private health cover policy with a £250 excess. You develop knee pain and your GP refers you to a specialist. (illustrative estimate)
- Consultation & Scans (illustrative): You see a consultant and have an MRI scan. The total bill for this is £1,200.
- Paying the Excess (illustrative): You are responsible for paying the first £250 of this bill. You might pay the hospital directly, or your insurer will pay the full amount and then ask you to reimburse them for the £250 excess.
- Insurer Pays the Rest (illustrative): Your private medical insurance provider then covers the remaining balance of £950 (£1,200 - £250).
The crucial point is that you only pay this excess once per policy year, or once per claim, depending on your policy's terms.
Key Characteristics of a Health Insurance Excess
- It’s a fixed sum: You know exactly how much you'll need to contribute (£250 in our example).
- It’s paid first: The excess is your initial contribution before the insurer's cover kicks in.
- It lowers your premium: Agreeing to pay a higher excess makes you less of a risk to the insurer for small claims, so they reward you with cheaper monthly payments.
- It can be "Per Claim" or "Per Policy Year": This is a vital distinction that can have a big impact on your finances.
The "Per Claim" vs. "Per Policy Year" Excess Explained
Understanding this difference is one of the most important steps in choosing the right policy.
- Per Policy Year Excess: You pay the excess only once during your 12-month policy period, regardless of how many separate claims you make for different conditions. This is generally the most common and customer-friendly option.
- Per Claim Excess: You must pay the excess for each new, unrelated claim you make within the policy year.
Let's use a table to see the difference in a real-world scenario.
| Scenario | Policy A: £500 Excess (Per Policy Year) | Policy B: £500 Excess (Per Claim) |
|---|---|---|
| Claim 1 (Jan): Shoulder surgery costing £6,000 | You pay £500. Insurer pays £5,500. | You pay £500. Insurer pays £5,500. |
| Claim 2 (July): Hernia repair costing £3,500 | You pay £0. Your annual excess is met. Insurer pays the full £3,500. | You pay £500 again for this new claim. Insurer pays £3,000. |
| Total Paid by You: | £500 | £1,000 |
As you can see, a 'per policy year' excess offers much better financial predictability and protection if you are unfortunate enough to need treatment for multiple unrelated conditions in the same year.
What is a Co-payment in Private Medical Insurance?
A co-payment works differently from an excess. Instead of a fixed amount, it's a percentage of the treatment cost that you agree to share with the insurer.
A Simple Definition of Co-payment
A co-payment is a feature where you agree to pay a certain percentage of the cost of every eligible claim, and the insurer pays the rest.
Common co-payment levels are 10%, 20%, or 25%. This feature is often added to a policy to significantly reduce the premium. It's a way of saying, "I will share the risk with you on every claim."
How Does a Co-payment Work in Practice?
Let's say you have a policy with a 20% co-payment. You need hip replacement surgery that costs a total of £12,000. (illustrative estimate)
- Calculate Your Share (illustrative): Your share is 20% of the total bill. 20% of £12,000 is £2,400.
- You Pay Your Share (illustrative): You are responsible for paying £2,400 of the cost.
- Insurer Pays Theirs (illustrative): The insurer covers the remaining 80%, which is £9,600.
The amount you pay is directly linked to the cost of the treatment. For a smaller claim, your contribution would be less. For example, on a £1,000 claim, your 20% co-payment would only be £200.
Co-payment Caps: An Important Safeguard
Because a percentage of a very large bill could become unaffordable, most of the best PMI providers in the UK apply a cap on the co-payment per claim or per year.
For example, your policy might have a "20% co-payment, capped at £1,000 per claim". In our £12,000 hip replacement example, your 20% share is £2,400. However, because of the cap, you would only have to pay a maximum of £1,000. This provides a crucial safety net against exceptionally high treatment costs.
Excess vs. Co-payment: A Head-to-Head Comparison
To make the choice clearer, let's compare the two features side-by-side.
| Feature | Excess | Co-payment |
|---|---|---|
| How It's Calculated | A fixed amount (e.g., £250). | A percentage of the total claim cost (e.g., 20%). |
| Cost Predictability | High. You know the exact maximum you'll pay at the start. | Variable. The amount you pay changes with the cost of treatment. |
| When It Applies | Once per policy year or once per claim. | Applies to every eligible claim (unless capped). |
| Best For... | People who prefer a predictable, one-off cost and want full cover after the excess is paid. | People who are comfortable sharing a portion of every claim cost in return for a lower premium. |
| Example Scenario | A £4,000 claim with a £500 excess. You pay £500, insurer pays £3,500. | A £4,000 claim with a 20% co-payment. You pay £800, insurer pays £3,200. |
| Financial Risk | Your risk is limited to the fixed excess amount. | Your risk is a percentage of the total bill, which is why a cap is so important. |
How Excess and Co-payment Affect Your Premiums and Savings
The primary reason to choose a policy with an excess or co-payment is to make your private medical insurance UK more affordable.
The Direct Impact on Your Monthly Premiums
Insurers calculate premiums based on risk. By agreeing to an excess or co-payment, you take on a small portion of the financial risk yourself. This reduces the insurer's potential payout, especially for smaller claims, and they pass these savings directly on to you through lower premiums.
The effect can be dramatic. Let's look at an illustrative example of how changing the excess can affect monthly costs for a typical policy.
Example Table: The Effect of Excess on Monthly Premiums (Note: These are illustrative figures. Your actual quote will depend on your age, location, and chosen cover level.)
| Excess Level (Per Year) | Example Monthly Premium | Potential Annual Saving (vs. £0 Excess) |
|---|---|---|
| £0 | £90 | £0 |
| £250 | £78 | £144 |
| £500 | £65 | £300 |
| £1,000 | £50 | £480 |
Choosing the Right Level for Your Budget
The perfect level is a personal choice based on your financial situation. Ask yourself:
- What can I comfortably afford to pay if I need to make a claim tomorrow? Your excess should not be more than the amount you have readily available in savings.
- Illustrative estimate: What is my tolerance for risk? If you want absolute peace of mind with no surprises, a £0 or low excess policy might be best, even with a higher premium. If you are young, healthy, and want a safety net for major issues only, a high excess of £1,000+ could be a smart, cost-effective choice.
This is where speaking to a PMI broker like WeCovr is invaluable. We can provide detailed quotes showing you the exact cost difference between various excess and co-payment options across multiple insurers, helping you find your ideal balance.
Can You Combine an Excess and a Co-payment?
Yes, some insurers allow you to combine both for the largest possible premium discount. This is an option for those who want the absolute lowest premium and are comfortable taking on a larger share of the cost at the point of claim.
Here's how it would work: Imagine a policy with a £250 excess and a 10% co-payment. You have a claim for a £5,000 procedure. (illustrative estimate)
- Pay the Excess (illustrative): You pay the first £250.
- Calculate the Remainder (illustrative): The remaining bill is £4,750 (£5,000 - £250).
- Pay the Co-payment (illustrative): You pay 10% of the remaining bill, which is £475.
- Your Total Cost (illustrative): Your total out-of-pocket expense is £250 + £475 = £725.
- Insurer's Payment (illustrative): The insurer pays the final balance of £4,275.
Critical Information You Must Know About UK PMI
Before choosing any policy, it's vital to understand what private medical insurance is designed for, and what it isn't.
PMI is for Acute Conditions, Not Chronic Ones
UK private medical insurance is designed to provide treatment for acute conditions.
- An acute condition is a disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery. Examples include cataracts, joint replacements, hernias, and most cancers. The goal is to return you to your previous state of health.
- A chronic condition is an illness that cannot be cured and requires long-term management or monitoring. Examples include diabetes, asthma, high blood pressure, and Crohn's disease.
Standard PMI policies do not cover the routine, long-term management of chronic conditions. The NHS remains the primary provider for this type of care in the UK.
The Rule on Pre-existing Conditions
A pre-existing condition is any medical issue for which you have experienced symptoms, sought advice, or received treatment before the start date of your PMI policy.
As a general rule, private health cover does not cover pre-existing conditions, at least not initially. Insurers manage this in two main ways:
- Moratorium Underwriting: This is the most common method. The policy automatically excludes any condition you've had in the 5 years before joining. However, if you then complete 2 continuous years on the policy without needing any treatment, advice, or medication for that condition, the insurer may agree to cover it in the future.
- Full Medical Underwriting (FMU): You complete a detailed health questionnaire when you apply. The insurer assesses your medical history and tells you upfront exactly what is and isn't covered. This provides more certainty but can take longer.
Beyond Excess and Co-payments: Other Ways to Manage Your PMI Costs
Excess and co-payments are not the only levers you can pull to make your policy more affordable. Consider these other powerful options:
The 'Six-Week Wait' Option
This is a popular way to reduce premiums by 20-30%. With this option, if the NHS can provide the inpatient treatment you need within six weeks of you being placed on the waiting list, you agree to use the NHS. If the NHS waiting time is longer than six weeks, your private medical insurance kicks in immediately. Given the current pressures on the health service, this is a very effective cost-saving measure.
According to the latest analysis of NHS England data by the British Medical Association, the waiting list for consultant-led elective care stood at over 7.5 million in late 2024. This context makes the six-week wait option a calculated and often beneficial choice for many.
Choosing Your Hospital List
Insurers group hospitals into tiers based on their costs. A policy that gives you access to every hospital in the country, including expensive prime London clinics, will cost the most. You can save money by choosing a policy with a more restricted hospital list that still includes excellent facilities near your home.
Outpatient Cover Limits
Outpatient care includes initial consultations, diagnostic tests, and scans before you are admitted to hospital. While full outpatient cover is available, you can reduce your premium by setting a limit on this benefit (e.g., £500, £1,000, or £1,500 per year). This means you'd be covered for major inpatient procedures but would contribute towards some of the initial diagnostic costs if they exceed your chosen limit. (illustrative estimate)
Embracing Wellness and Health Programmes
Many leading insurers now actively reward you for staying healthy. By linking your policy to a fitness tracker, going to the gym, or completing health checks, you can earn rewards like cinema tickets, coffee, and even direct discounts on your renewal premium.
At WeCovr, we support our clients' health journeys by providing complimentary access to our AI-powered nutrition app, CalorieHero, to help you manage your diet and wellness goals. Furthermore, WeCovr clients who purchase PMI or life insurance often qualify for valuable discounts on other policies they might need, such as home or travel insurance, delivering even greater value.
How a PMI Broker Like WeCovr Can Help
Choosing the right combination of excess, co-payment, hospital lists, and outpatient limits can feel overwhelming. This is where an independent broker adds immense value.
- Whole-of-Market Comparison: We are not tied to a single insurer. We compare policies from across the market to find the best fit for you.
- Expert Guidance: We translate the jargon and explain how different policy features will affect you in practice. Our expertise is reflected in our consistently high customer satisfaction ratings.
- Tailored to You: As an FCA-authorised, independent broker, we work for you. We listen to your needs and budget to create a shortlist of the most suitable options.
- No Extra Cost: Our service is completely free for you. We receive a commission from the insurer you choose, which is already built into the price of the policy, so you pay the same (or often less) than going direct.
With over 900,000 policies of various types arranged for our clients, our team has the experience to guide you through every step of the process with clarity and confidence.
What is a better choice: a high excess or a co-payment?
Do I have to pay the excess if I only have a consultation?
Can I change my excess or co-payment mid-policy?
Is private medical insurance worth it in the UK with the NHS?
Ready to find the right private health cover for you? Navigating excesses, co-payments, and provider options can be complex. The experts at WeCovr make it simple.
Sources
- NHS England: Waiting times and referral-to-treatment statistics.
- Office for National Statistics (ONS): Health, mortality, and workforce data.
- NICE: Clinical guidance and technology appraisals.
- Care Quality Commission (CQC): Provider quality and inspection reports.
- UK Health Security Agency (UKHSA): Public health surveillance reports.
- Association of British Insurers (ABI): Health and protection market publications.
