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How does excess work on health insurance?

  • Feb 14, 2023
  • Health Insurance

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The excess on a health insurance policy is the amount of money the policyholder pays towards the cost of their treatment when making an eligible claim. The exact amount varies, but policyholders are usually able to choose the excess they want, often from £100 up to £1,000. The rest of the claim amount is then covered by the health insurance provider, in line with any limits and other terms and conditions of the policy.

A health insurance excess is beneficial for clients because it brings their premium down. This is because you agree to pay a part of your treatment costs when claiming and therefore the provider discounts your premium at the beginning of your contract.

In this article, we will explain health insurance excesses in more detail, including how they work and how they could benefit you.

What does ‘excess’ mean in health insurance?

In health insurance, an excess refers to the amount of money paid by the policyholder towards their claim. The excess amount is agreed at first purchase or renewal but how it is applied will depend on the terms and conditions of your policy and can vary from one provider to another.

Typically, an excess applies once to each insured person during each period of insurance at the beginning of their first valid claim. For example, if two people who are on the same policy each make a valid claim during the same policy term, they both have to pay an excess. But if any further valid claims are made during the same period of insurance, they will not need to pay another excess until the next period of insurance.

With some policies, an excess might apply to each claim. This means that an excess must be paid at the start of each valid claim, by each person insured.

Make sure you read your policy terms and conditions carefully as it’s important to understand how your policy excess is applied.

How does a health insurance excess work?

When the policyholder makes a successful claim, they are responsible for paying the excess amount towards their treatment. The insurer will then pay the remaining amount up to the policy limit. Here are some examples of how health insurance excesses work when applied once for each insured person during a period of insurance:

  • If you have a £200 excess on your policy, and you are claiming for £1,000, your insurer will pay £800 towards your claim.
  • If you have a £200 excess on your policy, and you are claiming for £200, you will meet the full cost of the claim through the excess.
  • If you have a £200 excess on your policy, and you are claiming for £100, you will meet the full cost of the claim through the excess. However, you still have £100 of the excess remaining, so the next time you claim, your remaining excess is £100.

Is a health insurance excess required?

Some health insurance policies have a compulsory excess set by the insurer which can’t be removed, and you must pay this when you claim. On top of the compulsory excess, you might be able to add a voluntary excess to lower your premium.

How much is a health insurance excess?

The exact amount of your health insurance excess depends on the insurer, the policy, and your preference. With a voluntary excess, you can choose how much you want your excess to be, usually from £100 to £1,000, but with a compulsory excess, the amount will be set by the insurer.

Can you change your health insurance excess?

You may be able to change the amount of your voluntary health insurance excess at policy renewal, but this could depend on the different insurers and their terms and conditions. However, you won’t be able to opt out of any compulsory excess that your insurer has added onto your policy.

What happens when you change your excess?

A higher excess decreases your premium, but this also means you must pay a higher excess when claiming. On the other hand, a lower excess means a more expensive premium but when it comes to claiming, your contribution amount is lower.

How is a health insurance excess paid?

How you pay your health insurance excess depends on your policy and the type of claim made. In some instances, you might be required to pay the excess directly to the treatment provider. After the excess is paid, the insurer will pay the remainder of the claim, according to your policy limits.

On other occasions, you might need to pay the entire bill yourself directly to the treatment provider and the insurer will reimburse you minus the excess (in line with your benefit limits).

What are the benefits of a health insurance excess?

Although terms and conditions may differ between insurers and their policies, there are some advantages that policyholders could benefit from when adding an excess onto their health insurance policy.

For individuals and families, having an excess means a lower premium, whether you pay your premium annually or monthly. This is because you agree to pay a contribution towards your claim, making it cheaper for the insurer. But if you don’t make any claims throughout your policy year, you don’t have to pay an excess which means your overall health insurance cost is cheaper.

For employers, having an excess on your group policy could be a deterrent for claiming frequently and for small amounts which may otherwise result in higher rates at renewal.

How does excess work with Freedom Health Insurance?

With Freedom Essentials, our affordable health insurance plan, a compulsory £100 excess is applied to every policy. On top of this you can choose to add a voluntary excess of £100, £250, £500 or £1,000.

With Freedom Elite, our comprehensive health insurance plan, you have the freedom to choose an excess-free policy or add a voluntary excess of £100, £250, £500 or £1,000.

You can use our free, no-obligation quote tool to see how different excess amounts can lower or increase your premium and apply online in just a few steps.