TL;DR
Understanding your private medical insurance excess is crucial as it directly impacts both your premium and how much you pay when claiming. At WeCovr, our UK-based experts, who have helped arrange over 900,000 policies, can guide you to the perfect balance of cost and cover.
Key takeaways
- An excess is the fixed amount you pay towards your private medical treatment cost before your insurer pays the rest.
- Choosing a higher excess (e.g., £500) significantly lowers your monthly premium, making cover more affordable.
- A lower excess (e.g., £100) means a higher premium but less to pay out-of-pocket when you make a claim.
- The excess is usually paid once per policy year, per person, regardless of how many claims you make.
- Some insurers offer a 'co-payment' option, a percentage of the claim cost, which works differently to a standard excess.
Navigating the world of private medical insurance (PMI) in the UK can feel complex, but understanding one key concept—the excess—is the single most powerful way to control your costs. At WeCovr, our experienced team has helped arrange over 900,000 insurance policies, and we find that the excess is the most frequently misunderstood part of a plan. This guide will demystify the PMI excess, explaining precisely how it works and how your choice directly shapes your premiums.
Private health insurance is designed to cover the costs of diagnosis and treatment for acute medical conditions that arise after your policy begins. It gives you fast access to specialists and high-quality private facilities, complementing the invaluable services of the NHS. The excess is simply the portion of the claim you agree to pay yourself.
How choosing a £100 vs £500 excess changes your premium and costs
The choice between a low or high excess is the fundamental trade-off in private health insurance: you are balancing lower monthly payments against a higher potential one-off cost if you need to claim.
Let's break it down.
- A low excess (£100): You pay a higher monthly premium. In return, if you need treatment, your out-of-pocket cost is minimal. This option prioritises peace of mind and predictability.
- A high excess (£500): You pay a significantly lower monthly premium. In return, you agree to contribute a larger amount if you make a claim. This option prioritises budget-friendliness.
To make this tangible, let's look at an example for a healthy 40-year-old living in the South East, seeking a mid-range PMI policy.
| Feature | Policy with £100 Excess | Policy with £500 Excess |
|---|---|---|
| Estimated Monthly Premium | £75 | £55 |
| Annual Premium Cost | £900 | £660 |
| Annual Premium Saving | - | £240 |
| Your Cost on First Claim | £100 | £500 |
| Your Total Outlay in Year 1 (with one claim) | £900 + £100 = £1,000 | £660 + £500 = £1,160 |
As the table shows, opting for the £500 excess saves you £240 per year on premiums. However, if you make a claim in that first year, your total cost will be higher (£1,160 vs £1,000).
Real-Life Scenarios
Scenario 1: You need a knee arthroscopy costing £4,500.
- With a £100 excess: You pay the first £100 directly to the hospital. Your insurer pays the remaining £4,400.
- With a £500 excess: You pay the first £500 directly to the hospital. Your insurer pays the remaining £4,000.
Scenario 2: You go three years without making a claim.
- With a £100 excess: You have paid £900 x 3 = £2,700 in premiums.
- With a £500 excess: You have paid £660 x 3 = £1,980 in premiums. You have saved £720 over the three years.
This saving of £720 is more than the difference between the two excess levels (£400). This demonstrates that if you don't expect to claim frequently, a higher excess can be financially astute. You are essentially "self-insuring" for the first £500 of any claim in exchange for a guaranteed annual discount.
What Exactly is an Excess in Private Health Insurance?
In simple terms, an excess (also known as a deductible) is a pre-agreed amount of money you must contribute towards the cost of your private medical treatment before your insurance provider begins to pay.
Think of it like the excess on your car insurance policy. If you have a £250 excess and your car needs a £1,000 repair, you pay the first £250, and your insurer covers the remaining £750. A private health insurance excess works in exactly the same way.
Key Facts about PMI Excess:
- It's a fixed amount: You choose a fixed sum, for example, £100, £250, or £500.
- It's usually paid per person, per policy year: This is a crucial point. You typically only pay the excess once in a policy year, no matter how many separate claims you make for different conditions. Once paid, your insurer covers 100% of eligible costs for the rest of that year (up to your policy limits).
- It helps keep premiums affordable: By sharing a small portion of the risk, policyholders help insurers manage costs, which translates into lower premiums for everyone.
How the Excess Works in Practice: A Step-by-Step Guide
Understanding the practical journey of using your policy and paying the excess is key to feeling confident in your cover.
- You develop a medical symptom: For example, persistent knee pain. You visit your NHS GP.
- You receive a referral: Your GP diagnoses a potential issue and gives you an 'open referral' to see an orthopaedic specialist.
- You contact your PMI provider: You call your insurer's claims line, explain the situation, and provide your GP referral details. They will authorise the consultation.
- You see a specialist: Your insurer provides a list of approved specialists and hospitals. You book an appointment and have your consultation.
- Diagnosis and Treatment Plan: The specialist recommends an MRI scan and then, based on the results, a knee arthroscopy. You inform your insurer at each stage, and they pre-authorise the treatment.
- You receive treatment: You have the procedure at the approved private hospital.
- Paying the Excess: The hospital will typically send you an invoice for the excess amount (e.g., £250). You pay this directly to them. Alternatively, some insurers pay the full bill and then invoice you for the excess.
- The Insurer Settles the Balance: The hospital sends the main invoice (for thousands of pounds) directly to your insurance company, who settles the bill in full.
Important Note: If you needed further separate treatment for a different condition (e.g., gallbladder removal) later in the same policy year, you would not have to pay the excess again.
What are the Typical Excess Levels Available in the UK?
UK insurers offer a wide range of excess options to suit different budgets and preferences. While the exact figures vary slightly between providers like AXA Health, Bupa, Vitality, and Aviva, the common tiers are:
- £0: The highest premium, but zero contribution from you when you claim.
- £100 / £150: A very popular low-end option for those wanting peace of mind.
- £250: A balanced middle-ground, offering decent premium savings.
- £500: A popular choice for healthy individuals and families looking for significant premium reductions.
- £1,000+: The largest premium discount, suitable for those with substantial savings who only want their PMI for major medical events.
Excess Level vs. Premium Discount: A General Guide
| Excess Level | Typical Premium Reduction (Compared to £0 Excess) | Best For... |
|---|---|---|
| £0 | 0% | Maximum peace of mind; no out-of-pocket costs on claims. |
| £100 | Approx. 5-10% | Those who want minimal costs when claiming and can afford a slightly higher premium. |
| £250 | Approx. 15-20% | The "best of both worlds" – a noticeable premium saving with a manageable excess. |
| £500 | Approx. 25-35% | Budget-conscious individuals/families who are happy to self-fund minor costs. |
| £1,000 | Approx. 40-50% | High-earners with savings, using PMI as a safeguard against major surgical costs. |
These percentages are illustrative estimates. The actual discount depends on your age, location, and chosen level of cover. An expert broker at WeCovr can provide exact quotes for your circumstances.
Choosing the Right Excess Level for You: A Strategic Guide
There is no single "best" excess—the right choice is entirely personal. As an FCA-regulated broking firm, we help clients weigh these factors every day. Here’s what you should consider:
- Your Monthly Budget: How much can you comfortably afford to pay in premiums each month? If your budget is tight, a higher excess is the most effective way to make a comprehensive policy affordable.
- Your Savings: Could you pay your chosen excess tomorrow without causing financial stress? If a £500 or £1,000 bill would be difficult, you should opt for a lower excess.
- Your Health & Lifestyle: Are you young, fit, and healthy with no reason to expect you'll need treatment? A higher excess might be a sensible gamble. If you have a history of minor issues or are getting older, a lower excess provides more security.
- Your Risk Tolerance: How important is financial certainty to you? If the thought of an unexpected £500 bill worries you, the higher premium for a £100 excess is a price worth paying for peace of mind.
Our clients at WeCovr who purchase PMI also gain complimentary access to our AI-powered calorie and nutrition tracking app, CalorieHero, helping them stay on top of their health and potentially reduce the need to claim in the first place.
Common Mistakes to Avoid When Choosing Your PMI Excess
Our advisers see the same few mistakes time and again. Avoid these common pitfalls:
- Setting it Too High: The most common error is being tempted by a low premium and choosing an excess you simply cannot afford to pay. This defeats the purpose of having insurance.
- Forgetting it's "Per Person": On a family policy, the excess usually applies per person. If you and your partner both need to claim in the same year, you will each have to pay the excess once.
- Confusing it with Co-Payment: An excess is a fixed sum. A co-payment is a percentage. Don't confuse the two (more on this below).
- Ignoring the "Claim Under Excess" Scenario: If your treatment cost is less than your excess, you will have to pay for it all yourself. For example, if you have a £500 excess and a consultation costs £250, you pay the £250. Your insurer pays nothing, and your excess is not considered 'used' for the year.
Excess vs. Co-payment: What's the Difference?
Some insurers, notably Vitality, offer an alternative cost-sharing option called a "co-payment" or "shared responsibility." It's vital to understand how this differs from a standard excess.
- Excess: A fixed amount you pay at the start of a claim (e.g., £250).
- Co-payment: A percentage of each claim you pay (e.g., you pay 25% of the total bill, and the insurer pays 75%).
Let's compare them for a £10,000 surgery bill:
| Cost-Sharing Model | Your Contribution | Insurer's Contribution | Your Total Out-of-Pocket Cost |
|---|---|---|---|
| £500 Excess | £500 | £9,500 | £500 |
| 25% Co-payment | 25% of £10,000 = £2,500 | 75% of £10,000 = £7,500 | £2,500 |
As you can see, for large claims, a co-payment can result in a much higher out-of-pocket cost. Co-payment options often come with a cap on how much you will pay in a year (e.g., a maximum of £1,000). This option can work well, but you must understand the maths before committing.
The Wider Context: Your Excess is Just One Part of Your Policy
To make an informed decision, you must see the excess as one piece of a larger puzzle. Other key elements of your UK private medical insurance policy include:
- Underwriting Type: This determines how pre-existing conditions are treated. Moratorium underwriting automatically excludes conditions you've had in the last 5 years, while Full Medical Underwriting requires you to declare your medical history upfront. Standard UK PMI does not cover pre-existing or chronic conditions.
- Level of Cover: Your policy will have limits. For example, your outpatient cover might be capped at £1,000 per year. Even after you pay your excess, the insurer will only pay up to this limit.
- Hospital List: Insurers have different tiers of hospital lists. A more restrictive list leads to a lower premium.
- Exclusions: All policies have standard exclusions. Private medical insurance in the UK is for acute conditions. It does not cover chronic conditions (like diabetes or asthma), normal pregnancy, cosmetic surgery, or A&E visits.
An independent broker like WeCovr can explain how all these elements interact and build a policy that perfectly matches your needs and budget, ensuring there are no surprises when you need to claim. We also offer discounts on other policies like life insurance when you take out PMI with us, providing even greater value.
Ready to Find the Right Balance?
Choosing an excess is a strategic decision. A higher excess offers fantastic savings on your annual premium, making it a great choice for those who are healthy and have adequate savings. A lower excess provides ultimate peace of mind, ensuring your costs are minimal if you fall ill.
The key is to make a conscious choice based on your personal circumstances. By understanding how the excess works, you can take control of your private health cover and build a plan that delivers security and value.
To see exactly how changing the excess impacts your premium with the UK's best PMI providers, speak to one of our friendly, independent advisers today. We'll give you clear, impartial quotes and help you find a strong fit for your needs at no cost to you.
Do I have to pay an excess for every single claim I make?
Can I change my private health insurance excess?
What happens if my private treatment costs less than my excess?
Is a £0 excess policy a good idea?
Sources
NHS England Office for National Statistics (ONS) Financial Conduct Authority (FCA) gov.uk National Institute for Health and Care Excellence (NICE)
Disclaimer: This is general guidance only and does not constitute formal tax or financial advice. Tax treatment depends on individual circumstances, policy terms, and HMRC interpretation, which cannot be guaranteed in advance. Whenever applicable, businesses and individuals should always consult a qualified accountant or tax adviser before arranging such policies.
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