Health Insurance Excess vs. Co-Pay How to Cut Your Premium by 40%
TL;DR
Choosing the right private medical insurance (PMI) in the UK can feel like a balancing act between comprehensive cover and affordable premiums. At WeCovr, an FCA-authorised broker that has helped arrange over 900,000 policies, we know the secret isn't just what you cover, but how you share the cost. Understanding the difference between an excess and a co-pay is the single most powerful tool you have to reduce your premium, sometimes by as much as 40%.
Key takeaways
- Excess: A fixed amount of money (e.g., £500) you agree to pay towards a claim.
- Co-pay: A percentage of the total claim cost (e.g., 25%) you agree to pay.
- Option A: A £500 excess, which reduces your premium by 25% to £900 per year.
- Option B: A 25% co-pay (capped at £1,000 per claim), which reduces your premium by 35% to £780 per year.
- For claims below £2,000, the co-pay option is cheaper. You pay a smaller contribution.
Choosing the right private medical insurance (PMI) in the UK can feel like a balancing act between comprehensive cover and affordable premiums. At WeCovr, an FCA-authorised broker that has helped arrange over 900,000 policies, we know the secret isn't just what you cover, but how you share the cost. Understanding the difference between an excess and a co-pay is the single most powerful tool you have to reduce your premium, sometimes by as much as 40%.
This guide breaks down the maths, showing you precisely when a fixed excess is more economical than a percentage-based co-payment, empowering you to make the smartest choice for your health and your wallet.
The math behind Shared Responsibility. We calculate when it is cheaper to pay a percentage of your claim vs. a fixed £500 excess
In the world of private health insurance, "shared responsibility" is the principle that you and your insurer share the cost of your treatment. This is the mechanism that makes premiums affordable. By agreeing to pay a portion of any claim, you demonstrate to the insurer that you will only claim when necessary, which reduces their overall risk and, in turn, lowers your monthly or annual premium.
The two primary ways to share this cost are through an excess and a co-pay (often called co-insurance).
- Excess: A fixed amount of money (e.g., £500) you agree to pay towards a claim.
- Co-pay: A percentage of the total claim cost (e.g., 25%) you agree to pay.
The critical question is: which one saves you more money, both on your premium and if you need to claim? Let's run the numbers.
Imagine your standard premium is £1,200 per year. You are offered two options for a significant discount:
- Option A: A £500 excess, which reduces your premium by 25% to £900 per year.
- Option B: A 25% co-pay (capped at £1,000 per claim), which reduces your premium by 35% to £780 per year.
Instantly, the co-pay option gives you a cheaper premium. But what happens when you actually make a claim?
Cost Scenario Analysis: Excess vs. Co-Pay
This table shows your total out-of-pocket cost (your contribution + your annual premium) under different claim scenarios.
| Treatment Cost | Option A: £500 Excess | Option B: 25% Co-pay | Cheaper Option |
|---|---|---|---|
| Claim Amount | Your Contribution | Your Contribution | |
| £1,000 | £500 | £250 | Co-pay |
| £2,000 | £500 | £500 | Identical |
| £5,000 | £500 | £1,000 (capped) | Excess |
| £10,000 | £500 | £1,000 (capped) | Excess |
| £25,000 | £500 | £1,000 (capped) | Excess |
| Total Annual Cost | (Contribution + £900 Premium) | (Contribution + £780 Premium) | |
| £1,000 Claim | £1,400 | £1,030 | Co-pay |
| £2,000 Claim | £1,400 | £1,280 | Co-pay |
| £5,000 Claim | £1,400 | £1,780 | Excess |
| £10,000 Claim | £1,400 | £1,780 | Excess |
The Break-Even Point:
As the table clearly shows, the break-even point for the claim itself is £2,000.
- For claims below £2,000, the co-pay option is cheaper. You pay a smaller contribution.
- For claims above £2,000, the fixed £500 excess becomes significantly cheaper because your contribution is capped at £500, whereas the co-pay contribution rises until it hits its own cap (in this case, £1,000).
Key Insight: Choosing a co-pay is a calculated gamble. You secure a lower premium, betting that any claims you make will be for smaller, less expensive procedures like diagnostic tests or a few specialist consultations. If you need major surgery (e.g., a knee replacement costing £15,000), the fixed excess policy would have saved you £500 on the claim itself.
What is a Health Insurance Excess? A Deep Dive
An excess is the most common form of cost-sharing in UK private medical insurance. It's a pre-agreed, fixed amount you contribute towards the cost of treatment before the insurer pays the rest.
How it Works:
- You select an excess level when you buy your policy (e.g., £0, £100, £250, £500, £1,000).
- The higher your chosen excess, the lower your premium.
- The excess is typically applied either per policy year or per claim. This is a crucial distinction.
- Per Policy Year: You pay the excess only once per year, regardless of how many separate claims you make. This is generally more favourable.
- Per Claim: You must pay the excess for each new, unrelated condition you claim for within the policy year.
The Impact of Excess on Your Premium
Choosing an excess is one of the quickest ways to manage your PMI cost. The savings are substantial and predictable.
| Excess Level | Typical Premium Reduction (Approx.) | Who is it for? |
|---|---|---|
| £0 | 0% | Those wanting maximum peace of mind with no claim-time costs. |
| £100 - £250 | 10% - 20% | A good balance for moderate savings without a large out-of-pocket hit. |
| £500 | 20% - 30% | A popular choice for healthy individuals seeking significant premium savings. |
| £1,000+ | 30% - 40% | Best for those who see PMI as protection against major costs only. |
Insider Adviser Tip: Many clients initially favour a £0 excess but are often surprised to learn they could save £300-£400 a year by opting for a £250 excess. Over a 5-year period, that's a saving of up to £2,000. It's often worth self-insuring for that first small portion of a claim.
What is a Health Insurance Co-Pay? The Percentage Play
A co-pay, or co-insurance, is where you agree to pay a set percentage of every claim, not a fixed amount. Common options in the UK market are 10%, 20%, or 25%.
How it Works:
- You choose a percentage (e.g., 20%) when setting up your policy.
- For any claim, the insurer pays 80%, and you pay 20%.
- Crucially, most UK insurers cap the co-pay amount. For example, a 25% co-pay might be capped at £1,000 per member, per policy year. This is a vital safety net that prevents your contribution from spiralling on very large claims. Without a cap, a 25% co-pay on a £100,000 cancer treatment claim would be an unaffordable £25,000.
Why Choose a Co-pay? The primary motivation is the premium discount, which is often greater than the discount for a mid-range excess.
- Best for: Individuals who expect to make infrequent or low-cost claims (e.g., for diagnostics or consultations).
- Riskier for: Those concerned about the cost of major, complex surgery or lengthy cancer treatments, where the percentage-based contribution can quickly reach its cap.
Some insurers, like Vitality and The Exeter, have popularised co-pay models by integrating them cleverly into their product structures, offering significant upfront premium reductions.
How to Cut Your Premium by 40%: The Layering Strategy
Achieving a 40% or even 50% reduction in your PMI premium is rarely about a single choice. It’s about intelligently layering several cost-sharing and policy-limiting options together. An expert broker can be invaluable here, but here is the strategy laid bare.
Let's assume a baseline premium for a comprehensive policy for a 40-year-old is £100 per month (£1,200 per year).
| Step | Action | Premium Impact | New Monthly Premium |
|---|---|---|---|
| 1 | Baseline Premium | - | £100 |
| 2 | Add a £500 Excess | -25% | £75 |
| 3 | Limit Hospital List (to a "Guided" or "Expert Select" network) | -15% | £63.75 |
| 4 | Add a 6-Week Wait Option (PMI only pays if NHS wait is > 6 weeks) | -10% | £57.38 |
Total Reduction: £42.62 per month, or a 42.6% saving.
In this scenario, by combining three key strategies, the annual premium drops from £1,200 to just £688. This transforms PMI from a significant expense into a much more manageable financial safety net.
Your main cost-saving levers are:
- Excess/Co-Pay: Choose the level of shared cost you're comfortable with.
- Hospital List: Most insurers offer a discount of 15-20% if you agree to use a curated network of high-quality, cost-effective private hospitals rather than having unrestricted choice.
- The 6-Week Wait Option: This popular option means your PMI will only cover in-patient treatment if the waiting time for that treatment on the NHS is longer than six weeks. As NHS waiting lists for elective surgery remain long, this option often provides cover when you need it while delivering a solid premium discount.
- Underwriting: While not a direct cost-sharing tool, choosing Moratorium underwriting over Full Medical Underwriting can affect your premium and claim process. A WeCovr adviser can explain the best fit for your circumstances.
Critical Information: What UK PMI Does Not Cover
It is essential to understand the limitations of private medical insurance in the UK. No policy covers everything. Standard UK PMI is designed to cover acute conditions – diseases, illnesses, or injuries that are likely to respond quickly to treatment and return you to your previous state of health.
UK private health cover does not typically cover:
- Pre-existing conditions: Any medical condition you had signs or symptoms of, or sought advice for, before your policy began.
- Chronic conditions: Long-term conditions that cannot be cured, only managed. This includes diabetes, asthma, high blood pressure, and most forms of arthritis. Your GP and the NHS remain your primary carers for chronic illness.
- Emergencies: A&E visits, ambulance services, and immediate life-threatening situations are handled by the NHS.
- Normal pregnancy and childbirth.
- Cosmetic surgery (unless for reconstructive purposes after an accident or eligible surgery).
- Mental health treatment (this is often an optional add-on and may have specific limits).
PMI is a complement to the NHS, not a replacement for it. It provides you with choice, speed of access, and comfort for eligible, non-emergency conditions.
Navigating the UK's Top PMI Providers
The UK market is home to several excellent insurers, each with a unique approach to excesses, co-pays, and policy structure.
- Bupa: A household name, often offering straightforward excess options and extensive hospital networks.
- AXA Health: Known for its flexible policies and strong focus on customer support through its claims process.
- Aviva: A major player with competitive pricing and a "guided" hospital option called Expert Select that offers significant savings.
- Vitality: Famous for its wellness-oriented approach, rewarding healthy living with premium discounts and other perks. Their co-pay options are a core part of their product design.
- The Exeter: A friendly society known for its flexible underwriting and clear policy language, particularly popular with self-employed individuals.
Comparing these providers' subtle differences in how they apply an excess (per year vs. per claim) or cap a co-pay is almost impossible without specialist knowledge. An independent PMI broker like WeCovr can compare the entire market in minutes, finding the policy that truly matches your budget and health priorities, at no extra cost to you.
As a WeCovr client, you also get complimentary access to our AI-powered calorie and nutrition tracking app, CalorieHero, and can benefit from discounts on other insurance products like life or income protection cover.
Your Final Checklist: Excess or Co-Pay?
To decide which is right for you, ask yourself these three questions:
-
What is my risk tolerance?
- Low Risk Tolerance: You prefer predictable costs. Choose a fixed excess. You'll know exactly what you have to pay if you claim, protecting you from large, unexpected bills.
- Higher Risk Tolerance: You're comfortable with some variability to get a lower premium. A co-pay could be a great choice, especially if you're young and healthy.
-
What kind of claim am I most likely to make?
- Minor Claims: If you mainly want cover for diagnostics, consultations, or minor procedures, a co-pay will likely be cheaper overall.
- Major Claims: If your main fear is the cost of major surgery or cancer care, a fixed excess offers better financial protection for large claims.
-
How much can I afford to pay at the point of a claim?
- Be realistic. Don't choose a £1,000 excess if finding that money would be a major struggle. It's better to have a slightly higher premium with a £250 excess you can comfortably afford.
Ultimately, the best strategy is a personalised one. The maths shows there isn't a single "best" answer, only the best answer for you.
Ready to find out exactly how much you could save? An expert adviser can run these calculations for you in real-time, tailoring a quote that gives you the best of both worlds: robust protection and an affordable premium.
Can I have both an excess and a co-pay on my health insurance policy?
Do I pay the health insurance excess for every single consultation?
Is a higher excess always the best way to save money on PMI?
Related guides
Why private medical insurance and how does it work?
What is Private Medical Insurance?
Private medical insurance (PMI) is a type of health insurance that provides access to private healthcare services in the UK. It covers the cost of private medical treatment, allowing you to bypass NHS waiting lists and receive faster, more convenient care.How does it work?
Private medical insurance works by paying for your private healthcare costs. When you need treatment, you can choose to go private and your insurance will cover the costs, subject to your policy terms and conditions. This can include:• Private consultations with specialists
• Private hospital treatment and surgery
• Diagnostic tests and scans
• Physiotherapy and rehabilitation
• Mental health treatment
Your premium depends on factors like your age, health, occupation, and the level of cover you choose. Most policies offer different levels of cover, from basic to comprehensive, allowing you to tailor the policy to your needs and budget.
Questions to ask yourself regarding private medical insurance
Just ask yourself:👉 Are you concerned about NHS waiting times for treatment?
👉 Would you prefer to choose your own consultant and hospital?
👉 Do you want faster access to diagnostic tests and scans?
👉 Would you like private hospital accommodation and better food?
👉 Do you want to avoid the stress of NHS waiting lists?
Many people don't realise that private medical insurance is more affordable than they think, especially when you consider the value of faster treatment and better facilities. A great insurance policy can provide peace of mind and ensure you receive the care you need when you need it.
Benefits offered by private medical insurance
Private medical insurance provides numerous benefits that can significantly improve your healthcare experience and outcomes:Faster Access to Treatment
One of the biggest advantages is avoiding NHS waiting lists. While the NHS provides excellent care, waiting times can be lengthy. With private medical insurance, you can often receive treatment within days or weeks rather than months.
Choice of Consultant and Hospital
You can choose your preferred consultant and hospital, giving you more control over your healthcare journey. This is particularly important for complex treatments where you want a specific specialist.
Better Facilities and Accommodation
Private hospitals typically offer superior facilities, including private rooms, better food, and more comfortable surroundings. This can make your recovery more pleasant and potentially faster.
Advanced Treatments
Private medical insurance often covers treatments and medications not available on the NHS, giving you access to the latest medical advances and technologies.
Mental Health Support
Many policies include comprehensive mental health coverage, providing faster access to therapy and psychiatric care when needed.
Tax Benefits for Business Owners
If you're self-employed or a business owner, private medical insurance premiums can be tax-deductible, making it a cost-effective way to protect your health and your business.
Peace of Mind
Knowing you have access to private healthcare when you need it provides invaluable peace of mind, especially for those with ongoing health conditions or concerns about NHS capacity.
Private medical insurance is particularly valuable for those who want to take control of their healthcare journey and ensure they receive the best possible treatment when they need it most.
Important Fact!
We can look at a more suitable option mid-term!
Why is it important to get private medical insurance early?
👉 Many people are very thankful that they had their private medical insurance cover in place before running into some serious health issues. Private medical insurance is as important as life insurance for protecting your family's finances.👉 We insure our cars, houses, and even our phones! Yet our health is the most precious thing we have.
Easily one of the most important insurance purchases an individual or family can make in their lifetime, the decision to buy private medical insurance can be made much simpler with the help of FCA-authorised advisers. They are the specialists who do the searching and analysis helping people choose between various types of private medical insurance policies available in the market, including different levels of cover and policy types most suitable to the client's individual circumstances.
It certainly won't do any harm if you speak with one of our experienced insurance experts who are passionate about advising people on financial matters related to private medical insurance and are keen to provide you with a free consultation.
You can discuss with them in detail what affordable private medical insurance plan for the necessary peace of mind they would recommend! WeCovr works with some of the best advisers in the market.
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