TL;DR
Choosing the wrong excess on UK private medical insurance can create 'false savings' that cost more in the long run. WeCovr works with experts drawing on experience across more than 1 million policies of various classes, explain how to select a suitable excess that balances premium costs with affordable access to care.
Key takeaways
- A higher excess reduces your premium but means you pay more towards your first claim each year.
- Selecting an unaffordably high excess to lower premiums can make your policy unusable when you need it.
- Insurers offer different excess structures: per-claim vs. per-policy-year. This choice significantly impacts costs.
- Some insurers reduce or waive the excess for certain treatments, like day-patient procedures, creating hidden value.
- The optimal excess level depends on your personal budget, risk tolerance, and the policy's overall structure.
Choosing a private medical insurance (PMI) policy in the UK involves balancing comprehensive cover with an affordable premium. At WeCovr, where our team draws on experience across more than 1 million policies of various classes, we find one element consistently trips people up: the excess. Misunderstanding how an excess works can lead to significant and unexpected costs, turning your safety net into a financial burden just when you need it most.
This article cuts through the confusion. We'll explore how the wrong excess can create "false savings," detail the different types of excesses available, and provide expert guidance on choosing an amount that makes sense for your finances and health needs.
How the wrong excess can distort pricing and create false savings
The core trade-off with a health insurance excess seems simple: the higher the excess you agree to pay, the lower your monthly or annual premium will be. For budget-conscious buyers, seeing a premium drop by £30, £50, or even more per month by selecting a £1,000 excess instead of a £250 one can be incredibly tempting.
This is the "false savings" trap.
A policy with a very high excess might have an attractive low premium, but it can become practically unusable for many common medical needs. If you need a diagnostic scan that costs £900, and your excess is £1,000, your expensive insurance policy pays nothing. You are left to cover the entire bill yourself, on top of the premiums you've been diligently paying.
The danger is creating a policy you can't afford to use. The saving on the premium becomes meaningless if the barrier to making a claim is too high for your personal financial situation. An effective policy needs an excess you can comfortably pay without causing financial distress.
What is a Private Health Insurance Excess?
In the simplest terms, a private health insurance excess is the amount of money you agree to pay towards the cost of your treatment before your insurance provider starts paying. It's a form of cost-sharing between you and the insurer.
Think of it like the excess on your car insurance. If you have a minor accident and the repair cost is £400, but your excess is £500, you pay the full repair bill yourself. If the repair cost is £2,000, you pay the first £500, and your insurer pays the remaining £1,500.
Why do insurers use excesses?
- To reduce small, frequent claims: It discourages claims for minor issues that might only cost a few hundred pounds, which would otherwise increase administrative costs and premiums for everyone.
- To share the risk: By having some "skin in the game," policyholders are encouraged to be more mindful of treatment costs.
- To offer lower premiums: It is the single most effective tool for policyholders to directly control the cost of their insurance premium.
Private medical insurance is designed to cover acute conditions that arise after your policy begins. It is crucial to understand that standard UK PMI policies do not cover chronic conditions (like diabetes or asthma) or pre-existing conditions you had before taking out the policy. The excess applies to eligible claims for new, acute conditions.
The Two Main Types of Excess: Per-Claim vs. Per-Year
This is one of the most critical distinctions that many buyers overlook. The structure of your excess dramatically changes how much you might pay out-of-pocket in a given year. The two main types offered by UK insurers are:
- Per-Policy-Year Excess: You pay the excess only once per policy year, for the first claim you make. Any subsequent claims in that same year will be covered in full by the insurer (up to your policy limits).
- Per-Claim (or Per-Condition) Excess: You must pay the excess for each separate claim you make for a new, unrelated medical condition.
Let's see how this plays out with a £500 excess.
| Scenario | Per-Policy-Year Excess (£500) | Per-Claim Excess (£500) | Analysis |
|---|---|---|---|
| One large claim in a year (e.g., knee surgery costing £8,000) | You pay £500. The insurer pays £7,500. | You pay £500. The insurer pays £7,500. | No difference in outcome. |
| Two unrelated claims in a year (e.g., Gynaecology consult costing £700, then ENT treatment costing £1,200) | You pay £500 total. You pay £500 on the first claim. The second claim is covered in full. | You pay £1,000 total. You pay £500 for the first claim AND £500 for the second. | The 'per-year' option is significantly cheaper here. |
| A recurring claim (e.g., multiple physiotherapy sessions for one back injury) | You pay £500 towards the first session(s). The rest are covered. | You pay £500 towards the first session(s). The rest are covered as it's one ongoing claim. | No difference in outcome for a single condition. |
Expert Insight: A "per-policy-year" excess is generally simpler and more predictable for budgeting. A "per-claim" excess can sometimes result in a slightly lower premium, but it carries the risk of multiple payments if you're unlucky enough to have several different health issues in one year. At WeCovr, we help clients model these scenarios to see which structure offers better value for their specific risk profile.
How Insurers Use Excesses to Shape Policy Value
Top UK health insurers like Aviva, Bupa, AXA Health, and Vitality use the excess not just as a pricing lever but also as a way to add nuanced value to their products. Ignoring these features means you could be missing out on significant benefits.
- Excess Waivers: Some insurers will waive the excess for certain treatments, meaning you pay nothing out-of-pocket. This is a common feature for cancer treatment, where insurers want to remove all financial barriers to care.
- Day-Patient Reductions: An insurer might halve or even waive your excess if your procedure is done on a day-patient basis (you are admitted to hospital for a procedure but do not stay overnight). This incentivises the use of more cost-effective treatment settings.
- Diagnostic Guarantees: Some policies may offer a benefit where certain diagnostic tests are covered without the excess applying.
- Co-payment Options: A less common alternative to a standard excess is a co-payment. Here, you might agree to pay 25% of every claim, often up to a capped amount per year. This can lower premiums significantly but introduces more variability in your out-of-pocket costs.
When comparing policies, don't just look at the headline excess number. Dig into the policy documents or, better yet, ask an expert adviser to compare how each insurer treats the excess under different circumstances.
The "False Savings" Trap: Real-Life Scenarios
Let's illustrate the danger of choosing an inappropriately high excess with two common scenarios.
Scenario A: The Young Professional
Amelia, a 28-year-old marketing manager, is healthy and wants to keep her costs low. She sees she can get a PMI policy for just £35/month with a £1,500 excess. A policy with a £250 excess would cost £60/month. She opts for the higher excess, saving £25/month.
A few months later, she experiences persistent joint pain. Her GP refers her for an MRI scan, which costs £850 privately.
- Outcome: Because the cost of the scan (£850) is less than her excess (£1,500), Amelia's insurance pays nothing. She must pay the full £850 out-of-pocket.
- The "False Saving": Her £25/month saving now seems trivial. It would take her 60 months (5 years) of premium savings to break even on this single out-of-pocket expense. For all intents and purposes, her policy was useless for this common diagnostic need.
Scenario B: The Family Policy
The Harris family choose a policy with a £500 per-claim excess to cover two adults and their child. In one year, their son develops an allergy and needs diagnostic tests and a consultation with a specialist (£900 cost), and Mrs. Harris needs physiotherapy for a shoulder injury (£700 cost).
- Outcome: They make two separate claims for two unrelated conditions.
- Claim 1 (Allergy): They pay the first £500.
- Claim 2 (Physio): They pay another £500.
- Total Out-of-Pocket: £1,000 for the year, on top of their premiums.
- The Better Option: A policy with a £750 per-policy-year excess might have had a slightly higher premium, but their total out-of-pocket cost for the year would have been capped at £750, saving them £250.
How to Choose a Suitable Excess for Your Circumstances
Choosing the right excess isn't about finding the lowest number; it's about finding the right balance for you. Here is a 5-step guide to making an informed choice.
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Assess Your "Rainy Day" Fund The most important rule: Your excess should be an amount you could pay tomorrow without causing financial hardship. If a £1,000 bill would force you onto a credit card or into your overdraft, a £1,000 excess is too high. Be realistic about your readily available savings.
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Consider Your Health and Risk Tolerance If you are young, in good health, and primarily want a policy for major, unforeseen events (the "big stuff"), a higher excess of £500 or £1,000 might be a calculated risk that makes sense. If you or your family members tend to need more frequent, smaller-scale consultations or therapies, a lower excess (£100 or £250) will likely provide far better value.
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Analyse the Premium Savings vs. the Risk Ask for quotes with different excess levels. Look at the annual saving and weigh it against the risk.
| Excess Level | Example Annual Premium | Annual Saving (vs. £250) | Risk |
|---|---|---|---|
| £0 | £1,200 | -£240 | No out-of-pocket claim costs, but highest premium. |
| £250 | £960 | £0 | A manageable amount for most, good all-round balance. |
| £500 | £816 | £144 | A significant saving, but requires a £500 lump sum for a claim. |
| £1,000 | £660 | £300 | Substantial saving, but makes the policy less useful for smaller claims. |
In this example, moving from a £250 to a £1,000 excess saves you £300 per year. However, you are taking on an extra £750 of risk. If you make a claim, it wipes out over two years of savings.
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Check the Fine Print for "Hidden Value" Don't assume all policies with a £500 excess are equal. Does one provider waive it for cancer care? Does another reduce it for day-patient surgery? These details can make a higher-excess policy much more attractive. This is where guidance from an FCA-regulated broker is invaluable, as they compare these features daily.
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Align the Excess with Your Outpatient Cover This is a classic mistake. If you choose an outpatient cover limit of £500 for the year but also have a £500 excess, your outpatient benefit is effectively nullified. You will pay for all your consultations and scans until the costs exceed £500, at which point your benefit is already used up. Ensure your outpatient limit is meaningfully higher than your excess.
Excesses on Company Health Insurance Schemes
For those with private health cover through an employer, the dynamics of the excess can be different.
- Who Pays? In many corporate schemes, the company pays the premium, but the employee is responsible for paying the excess when they make a claim. It is vital to check your scheme documents to understand your liability.
- Tax Implications: The cost of the medical insurance premium paid by your employer is typically treated as a Benefit-in-Kind (BIK). This means you pay income tax on the value of the premium. A higher excess lowers the premium, which in turn can reduce your personal tax liability. This can be an effective way for employees to manage their BIK tax bill if the company scheme allows for flexible excess choices.
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.
Making the Right Choice with Expert Help
Navigating the nuances of excesses, co-payments, policy limits, and provider-specific rules can be overwhelming. The "best" excess is entirely personal. It depends on a trade-off between your monthly budget, your savings, and your attitude to risk.
Using an FCA-regulated broker like WeCovr can help you compare options from a broad provider panel in one place. Our advisers can model the total cost of different options for you, highlighting the hidden pitfalls and value-adds that aren't obvious from a simple price comparison. We help you find a well-matched policy with an excess that provides real security, not false savings. As part of our commitment to our customers' wellbeing, we also provide complimentary access to our AI-powered calorie and nutrition tracking app, CalorieHero, and can offer discounts on other insurance products like life or income protection when you arrange cover with us.
Does UK private health insurance cover pre-existing conditions?
What is the difference between moratorium and full medical underwriting?
- Moratorium (Mori) Underwriting: This is the most common method. You do not declare your full medical history upfront. Instead, the insurer automatically excludes any condition you've had in the 5 years before the policy started. These exclusions may be lifted if you go for a continuous 2-year period on the policy without experiencing symptoms, needing treatment, or seeking advice for that condition.
- Full Medical Underwriting (FMU): You complete a detailed health questionnaire when you apply. The insurer then reviews your medical history and tells you exactly what is and isn't covered from day one. This provides more certainty but can be a longer application process.
Is private health insurance worth it in the UK?
What happens if my private treatment costs less than my excess?
Ready to Find the Right Balance?
Don't let a poorly chosen excess undermine your health insurance. Get clear, expert advice and compare quotes from the UK's leading providers to find a policy that offers genuine value and security.
Talk to one of the experienced FCA-regulated advisers that WeCovr works with today for a free, no-obligation review of your options. This may include WeCovr's own advisers and advisers from broker partners it works with in association. Advisers are responsible for keeping their market and regulatory knowledge up to date and explaining options clearly.
Sources
NHS England Office for National Statistics (ONS) Financial Conduct Authority (FCA) gov.uk National Institute for Health and Care Excellence (NICE)
Important Information and Risks
No advice: This article is for general information only. It is not financial, legal, insurance, or tax advice, and it is not a personal recommendation. WeCovr does not assess your individual circumstances or recommend a specific product through this article.
Policy exclusions and underwriting: Insurance policies, including life insurance, private medical insurance, critical illness cover, and income protection, are subject to insurer underwriting, eligibility, acceptance criteria, terms, conditions, limits, and exclusions. Pre-existing medical conditions may be excluded, restricted, or accepted on special terms unless an insurer confirms otherwise in writing.
Tax treatment: References to tax treatment, HMRC rules, or business reliefs are based on current UK legislation and guidance, which can change. Tax treatment depends on your personal or business circumstances and may differ from examples in this article.
Before you buy: Always read the Insurance Product Information Document (IPID), policy summary, and full policy terms before buying, renewing, changing, or keeping cover. If you are unsure whether a policy is suitable for you, speak to an insurance adviser.
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