Is it worth adding an excess to your medical insurance policy?

An excess is a common policy add on and is available from most large insurers. It reduces your insurers liability and results in cheaper premiums for the policyholder. An excess can be added to both individual and company policies.

What is an excess?

  • An excess is the amount you have to pay upon making an eligible claim on your insurance policy.

  • It can either be deducted from the amount your insurer gives to you as a settlement for your claim, or you may have to pay this sum to them directly.

  • An excess is normally applied on an annual basis, so regardless how many claims you make in a given year, you’ll only pay your excess once.

  • You can add or deduct your policy excess at the end of each policy year.

How much excess can you choose?

As it’s an additional option you can essentially choose whatever you’d like for the excess. Most large insurers operate policies with a range of excess options from as low as £50 to as high as £1000.

The higher you set your excess amount the cheaper your premiums will be.

How do you pay your excess?

  • This will depend on your insurer so ask them at the point of claim.

  • Generally if you are having treatment your excess amount will be deducted from what your insurer pays to the hospital or specialist. This means that instead of paying your excess direct to your insurer you will need to pay it instead to your service provider. Don’t worry if this sounds confusing, your insurer will write to you explaining exactly who the excess payment needs to go to.

  • If you’re receiving a settlement from your insurer for treatment you’ve already paid for yourself, the excess will be deducted from the value of your claim.

  • On some company policies the excess will be payable by your employer. If you’re in any doubt regarding this get in touch with your company HR for clarification.

Advantages of adding an excess

  • Only pay once per policy year – Regardless of how many claims you make the excess only needs to be paid once per person in any given policy year.

  • Cheaper premiums – It makes your policy more affordable.

  • Ability to add additional options – for the same price you were paying before the excess you can add on valuable extras such as primary care benefit and psychiatric care benefit.

  • Can help protect your no claims discount – If the cost of your claim doesn’t exceed your excess your insurer will not reduce your no claims discount. This can be useful as it means that relatively low value claims don’t lead to a reduction in your no claims discount for the next policy year.

Disadvantages of adding an excess

  • Can dissuade you from making a claim – If you know you’ve got an excess to pay it can put you off claiming. This is particularly true if you’ve got a large excess and don’t have the money available at the time you need it. As people who take out large excesses mainly do so in order to be able to afford the policy in the first place, its normally people who can afford this sudden expense the least that are impacted.

  • Can be complicated when used with an outpatient limit – If you’ve got an outpatient limit on your policy then this can work against your excess. Lets take an example of where you have a £500 outpatient limit and a £500 excess. If the first claim in your policy year is for outpatient treatment worth £700 then you will have to pay a £500 excess, and this will also use your entire outpatient limit, meaning you will be left with an additional £200 to pay for the remaining cost of your outpatient treatment.

  • Large excesses – If you opt for a large excess such as £5000 you may find your policy offers very little benefit. While medical costs can be considerable, and a procedure such as heart bypass could cost you over £40,000 privately, most common procedures for minor ailments would be under £5,000. Of course a large claim such as one for cancer would generally exceed this, but you may find a large excess renders you policy useless for all but the largest claim.

Choosing an excess can offer you the benefit of lowering your premiums and so is a popular option for many policyholders. While it might be tempting to choose a large excess to drastically reduce your premiums, pay some thought as to whether you’d have this amount available if you needed to make a claim.

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