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 in the UK can feel complex. One of the most critical, yet often misunderstood, components of any policy is the 'excess'. This article explains exactly how it works.
Key takeaways
- To reduce premiums: By agreeing to contribute a small portion of the claim cost, you reduce the insurer's financial risk. They pass this saving on to you in the form of a lower premium.
- To deter minor claims: An excess discourages policyholders from claiming for very small treatment costs that might be more economical to pay for out-of-pocket. This helps keep the overall claims costs down for the insurer, which in turn helps to keep premiums stable for all customers.
- How it works: If your policy has a £100 compulsory excess and you have a consultation and diagnostic scan costing £850, you would pay the first £100, and your insurer would cover the remaining £750.
- Why it exists: Insurers use a compulsory excess to establish a baseline contribution from all policyholders, helping to manage their risk and administrative costs for smaller claims. It's often a relatively low amount, perhaps £100 or £200.
- How it works: You select an amount you're comfortable paying if you need to claim. For example, you might choose a £250 voluntary excess. If your policy also has a £100 compulsory excess, your total excess would be £350.
As an FCA-authorised broker that has helped arrange over 900,000 policies, WeCovr understands that navigating the world of private medical insurance in the UK can feel complex. One of the most critical, yet often misunderstood, components of any policy is the 'excess'. This article explains exactly how it works.
WeCovr explains voluntary vs compulsory excess and how it affects your premium
Understanding your policy's excess is fundamental to managing the cost of your private health cover and ensuring there are no surprises when you need to make a claim. In essence, an excess is the amount you agree to pay towards the cost of your private medical treatment before your insurer covers the rest.
Think of it as your contribution to the claim. Choosing the right excess level is a balancing act: a higher excess typically means a lower monthly or annual premium, while a lower excess results in a higher premium. This guide will demystify the two main types of excess, explain how they function, and help you decide on the right level for your personal and financial circumstances.
What Exactly is an Excess in Private Health Cover?
In the context of UK private medical insurance (PMI), the excess is a fixed sum of money you pay when you make a claim. It's a standard feature across almost all insurance products, from car to home insurance, and health cover is no different.
The primary purpose of an excess is twofold:
- To reduce premiums: By agreeing to contribute a small portion of the claim cost, you reduce the insurer's financial risk. They pass this saving on to you in the form of a lower premium.
- To deter minor claims: An excess discourages policyholders from claiming for very small treatment costs that might be more economical to pay for out-of-pocket. This helps keep the overall claims costs down for the insurer, which in turn helps to keep premiums stable for all customers.
It's crucial to remember that you only pay the excess when you actually use your insurance to receive treatment. You do not pay it every month along with your premium.
The Two Types of Excess: Voluntary vs. Compulsory Explained
When you set up your PMI policy, you will encounter two potential types of excess. Some policies have one or the other, while some may have a combination of both.
1. Compulsory Excess
A compulsory excess is a fixed amount set by the insurance provider that you must pay on any claim. You have no control over this amount; it's a non-negotiable part of the policy's structure.
- How it works: If your policy has a £100 compulsory excess and you have a consultation and diagnostic scan costing £850, you would pay the first £100, and your insurer would cover the remaining £750.
- Why it exists: Insurers use a compulsory excess to establish a baseline contribution from all policyholders, helping to manage their risk and administrative costs for smaller claims. It's often a relatively low amount, perhaps £100 or £200.
2. Voluntary Excess
A voluntary excess is the amount you choose to pay on top of any compulsory excess. This is where you have the power to directly influence your premium. Insurers offer a range of voluntary excess options, typically from £0 up to £1,000 or even higher.
- How it works: You select an amount you're comfortable paying if you need to claim. For example, you might choose a £250 voluntary excess. If your policy also has a £100 compulsory excess, your total excess would be £350.
- The benefit: The higher the voluntary excess you choose, the lower your monthly or annual premium will be. This is the key trade-off you need to consider.
How Does the Excess Amount Affect Your PMI Premium?
The relationship between your excess and your premium is inverse: as one goes up, the other comes down. This is the most significant lever you can pull to make your private medical insurance UK policy more affordable.
Let's look at a hypothetical example to see how this works in practice. Please note these figures are for illustrative purposes only; your actual premium will depend on numerous factors including your age, location, medical history, and the level of cover you choose.
Table: Example Premiums vs. Excess Levels
| Voluntary Excess Chosen | Estimated Monthly Premium | Potential Annual Saving (vs. £0 Excess) |
|---|---|---|
| £0 | £85 | £0 |
| £100 | £78 | £84 |
| £250 | £69 | £192 |
| £500 | £55 | £360 |
| £1,000 | £42 | £516 |
As you can see, opting for a £500 excess instead of a £0 excess could reduce your premium by £30 per month, saving you £360 over the year. By choosing a £1,000 excess, the annual saving becomes a substantial £516.
This is why it's so important to consider what you could realistically afford to pay in the event of a claim. If you're a healthy individual who is unlikely to claim frequently, a higher excess might be a very sensible financial decision.
Choosing the Right Excess Level for You
Selecting the right excess is a personal decision based on your financial situation and attitude to risk. Here are the key factors to consider:
- Your Budget: How much can you comfortably afford for your monthly premium? If you need to keep monthly outgoings low, a higher excess is an effective way to achieve this.
- Your Savings: Do you have enough accessible savings to cover your chosen excess if you suddenly need treatment? There's no point choosing a £1,000 excess to save on premiums if you don't have £1,000 available to pay for a claim.
- Your Health: Consider your current health, lifestyle, and family medical history. If you anticipate needing to use your policy, a lower excess might be more appropriate, as you'll pay less out-of-pocket when you claim.
- Your Risk Appetite: Are you a cautious person who prefers to know that most costs will be covered, even if it means a higher premium? Or are you comfortable taking on a little more financial risk (the excess) in exchange for lower fixed costs (the premium)?
At WeCovr, our expert advisors can walk you through these considerations. We help you compare quotes from the best PMI providers, modelling how different excess levels impact the price, so you can find the perfect balance for your needs and budget at no extra cost.
Real-Life Examples: How Excess Works in Practice
Let's illustrate with a couple of common scenarios.
Scenario 1: Knee Surgery
- Patient: David, 45
- Policy Excess: £250 (paid once per policy year)
- Treatment: David injures his knee playing football and needs an MRI scan followed by arthroscopic surgery.
- Total Cost of Treatment:
- Initial consultation with specialist: £250
- MRI scan: £750
- Surgery (including surgeon and anaesthetist fees): £4,500
- Hospital stay and nursing: £1,500
- Post-op physiotherapy (6 sessions): £300
- Total Bill: £7,300
How the excess is applied:
David makes a claim. He is responsible for paying the first £250 of the cost. His insurer covers the remaining £7,050. Because his excess is "per year," he won't have to pay anything more towards claims for the rest of that policy year, no matter how much further treatment he needs for this or any other new, eligible condition.
Scenario 2: Minor Outpatient Treatment
- Patient: Sarah, 32
- Policy Excess: £500 (paid once per policy year)
- Treatment: Sarah develops persistent skin issues and is referred to a dermatologist.
- Total Cost of Treatment:
- Initial consultation: £220
- Follow-up consultation: £150
- Total Bill: £370
How the excess is applied:
The total cost of Sarah's treatment (£370) is less than her chosen excess (£500). In this case, she would pay the full £370 herself. Her insurance would not pay out. However, the £370 she paid is now counted towards her annual excess. If she needed further, more expensive treatment later in the same policy year, she would only have to pay the remaining £130 (£500 - £370) of her excess before her insurer would start paying.
Compulsory vs. Voluntary Excess: A Head-to-Head Comparison
To make the distinction crystal clear, here’s a simple comparison table.
| Feature | Compulsory Excess | Voluntary Excess |
|---|---|---|
| Who sets it? | The insurer. It is a fixed, mandatory part of the policy. | You, the policyholder. You choose from a range of options. |
| Can it be changed? | No, it is fixed by the provider for that policy tier. | Yes, you can usually change it at your annual renewal. |
| Purpose | To cover the insurer's basic administrative costs and deter very small claims. | To give you control over your premium. Higher excess = lower premium. |
| Typical Amount | Usually low, e.g., £100 or £200. | Varies widely, e.g., £0, £250, £500, £1,000+. |
| Impact on Premium | Minimal direct impact as it's a standard feature. | Major impact. The main tool for adjusting your premium. |
Excess Per Year vs. Excess Per Claim: Which is Better?
Another crucial detail to check in your policy documents is whether your excess is applied per policy year or per claim. This can make a significant difference to your potential costs.
- Excess Per Policy Year: You pay the excess only once per policy year, regardless of how many claims you make for different conditions. This is the most common and generally more favourable option in the UK PMI market. Once you've paid it, all subsequent eligible claims in that year are covered in full (up to your policy limits).
- Excess Per Claim (or Per Condition): You have to pay the excess for each new, separate medical condition you claim for. If you were unlucky enough to need treatment for a knee injury and then a separate heart condition in the same year, you would have to pay the excess twice.
Comparison Table: Per Year vs. Per Claim Excess
| Aspect | Excess Per Policy Year | Excess Per Claim / Per Condition |
|---|---|---|
| Payment Frequency | Pay the excess only on your first claim of the policy year. | Pay the excess for each new, unrelated claim you make. |
| Predictability | High. You know your maximum out-of-pocket cost is your excess amount. | Lower. Your total cost depends on how many times you claim. |
| Best For | Almost everyone. It provides cost certainty and is simpler to manage. | May result in a slightly lower premium, but carries more financial risk. |
| Example | You have a £250 excess. You claim for Condition A (£1000) and pay £250. Later you claim for Condition B (£2000). You pay £0 more. | You have a £250 excess. You claim for Condition A (£1000) and pay £250. Later you claim for Condition B (£2000) and pay another £250. |
Most leading UK private medical insurance providers now offer a "per year" excess as standard, as it's preferred by customers. Always clarify this point when comparing policies.
A Critical Note: Pre-existing and Chronic Conditions
It is vital for anyone considering private medical insurance in the UK to understand its core purpose. Standard PMI is designed to cover acute conditions that arise after you take out your policy.
- Acute Condition: A disease, illness, or injury that is likely to respond quickly to treatment and lead to a full recovery (e.g., joint replacement, cataract surgery, hernia repair).
- Chronic Condition: A condition that is long-lasting and often has no cure. It requires ongoing management rather than a one-off treatment (e.g., diabetes, asthma, high blood pressure, arthritis).
- Pre-existing Condition: Any illness, disease, or injury for which you have experienced symptoms, received medication, or sought advice before your policy start date.
Standard UK PMI policies DO NOT cover pre-existing or chronic conditions. The role of PMI is to complement the NHS, not replace it. The NHS provides excellent care for emergency services and the management of chronic conditions. PMI gives you choice and speed for eligible, acute conditions.
How WeCovr Helps You Find the Perfect Balance
Choosing the right PMI policy involves navigating a maze of options: hospital lists, outpatient limits, cancer cover, and, of course, the excess. This is where an independent PMI broker like WeCovr adds immense value.
- Market Comparison: We compare policies from a wide panel of the UK's leading insurers, saving you the time and hassle of getting individual quotes.
- Expert Guidance: Our advisors explain the jargon in simple terms. We’ll model different excess scenarios to show you the direct impact on your premium, helping you make an informed choice.
- Tailored to You: We don't do 'one-size-fits-all'. We take the time to understand your health needs, family situation, and budget to recommend a policy that truly fits.
- No Extra Cost: Our service is free to you. We are paid a commission by the insurer you choose, so you get expert, unbiased advice without paying a penny more.
We pride ourselves on our high customer satisfaction ratings, which reflect our commitment to clear, honest, and helpful guidance.
Beyond Excess: Other Ways to Manage Your PMI Costs
While adjusting your voluntary excess is the most powerful tool for controlling your premium, there are other factors you can tweak:
- Hospital List: Insurers have tiered hospital lists. Choosing a list that excludes the most expensive central London hospitals can significantly reduce your premium.
- Outpatient Cover: You can choose to limit the financial amount covered for outpatient diagnostics and consultations. A lower limit (e.g., £500 or £1,000 per year) will reduce the premium compared to a policy with full outpatient cover.
- The 6-Week Option: Some policies offer a '6-week wait' option. This means that if the NHS can provide the inpatient treatment you need within six weeks, you would use the NHS. If the NHS waiting list is longer than six weeks, your private cover kicks in. This can lead to substantial premium discounts.
- Protected No Claims Discount: Similar to car insurance, many PMI policies have a No Claims Discount (NCD). You can often pay a small additional amount to protect your NCD level, even if you make a claim.
Wellness, Health Tips, and Making the Most of Your Cover
The best way to manage health costs is to stay healthy. Modern private medical insurance is increasingly focused on preventative health, offering a range of wellness benefits and incentives to help you live a healthier lifestyle. According to the ONS, in 2022, healthy life expectancy at birth in the UK was around 62.4 years for males and 62.7 years for females, highlighting the importance of proactive health management throughout life.
- Diet: A balanced diet rich in fruits, vegetables, lean protein, and whole grains is foundational. The NHS 'Eatwell Guide' provides excellent, evidence-based recommendations. To help our clients on their wellness journey, WeCovr provides complimentary access to our AI-powered calorie and nutrition tracking app, CalorieHero, when you take out a policy.
- Exercise: The NHS recommends at least 150 minutes of moderate-intensity activity a week or 75 minutes of vigorous-intensity activity a week. This could be brisk walking, cycling, swimming, or team sports. Many PMI providers offer discounts on gym memberships and fitness trackers to encourage activity.
- Sleep: Quality sleep is vital for both physical and mental recovery. Aim for 7-9 hours per night. Establishing a regular sleep schedule and creating a restful environment can make a huge difference.
- Mental Wellbeing: Many PMI policies now include access to mental health support, such as telephone counselling lines or access to therapy sessions, often without needing to pay an excess.
By engaging with these wellness benefits, you not only improve your health but can also earn rewards and discounts from your insurer. Furthermore, clients who purchase PMI or life insurance through WeCovr are eligible for exclusive discounts on other types of cover we offer, such as home or travel insurance.
Frequently Asked Questions (FAQ) about PMI Excess
Here are answers to some of the most common questions our advisors receive about private medical insurance excess.
1. What happens if my treatment cost is less than my excess? If the total cost of your eligible treatment is less than your chosen excess amount, you will be responsible for paying the full bill yourself. Your insurance policy will not pay out. However, the amount you paid will typically count towards your annual excess limit, meaning you'll have less to pay if you need to make another claim in the same policy year.
2. Can I change my excess amount after my policy has started? You can usually change your voluntary excess, but only at your annual renewal date. You cannot change it mid-way through your policy year. Increasing your excess at renewal is a common way to manage a premium increase, while decreasing it will likely lead to a higher premium.
3. Do I have to pay the excess directly to the hospital? This depends on the insurer and the hospital. In most cases, the hospital will send the full invoice to your insurer. The insurer then pays their share and will inform you of the outstanding excess amount, which you will then need to pay directly to the hospital or specialist. Some insurers may require you to pay the excess upfront before authorising treatment.
4. Does the excess apply to every benefit on my policy? Not always. Some benefits, particularly wellness or add-on benefits, may be exempt from the excess. For example, some policies offer a certain number of physiotherapy or osteopathy sessions with no excess applied, or access to a 24/7 remote GP service without needing to pay. Always check your policy documents to see which benefits require an excess payment.
Take the Next Step with WeCovr
Understanding how excess works is the first step towards finding an affordable private health cover policy that gives you peace of mind. The key is to strike the right balance between a manageable monthly premium and an excess level you can comfortably afford if you need to claim.
Let our friendly, expert team do the hard work for you. We provide clear, impartial advice and personalised quotes from the UK's most trusted insurers.
Contact WeCovr today for your free, no-obligation private medical insurance quote and discover how affordable peace of mind can be.
