What affects the cost of health insurance?
Understand the main factors affecting private medical insurance premiums and how pricing can differ for company schemes.
The basics
Why premiums vary
The cost of private medical treatment can be substantial, particularly where hospital admission or complex procedures are required.
Private medical insurance is one way to manage some of that financial uncertainty. In return for a premium, an insurer pays towards or meets eligible treatment costs, subject to the terms of the policy. It does not necessarily make treatment cheaper, as you pay the premium whether or not you claim.
There is no single price for private medical insurance. Premiums depend on the people covered and the policy chosen. The sections below explain the main factors insurers take into account.
General information
What affects the cost
Six factors that affect premiums
Level of cover
Policies with more cover and more benefits usually cost more.
Age
Premiums usually rise with age, as older people are more likely to need treatment.
Who is covered
The number of people covered, such as a partner or children, can affect the premium.
Excess
An excess is the amount you pay towards a claim. Choosing a voluntary excess can reduce your premium.
Claims
Depending on the insurer, claims made in the previous year can affect the premium at renewal.
Medical inflation
Medical inflation refers to increases in the cost of providing healthcare, including hospital treatment, medical technology and medicines. These rising costs can increase the amount insurers expect to pay in claims, so they are an important factor when calculating premiums, including at renewal.
Insurance premium tax
Company schemes
How company schemes are priced
Company schemes are priced in different ways, depending on the insurer and the size of the scheme. The price usually depends on:
- The employees coveredFor many smaller schemes, premiums are calculated for each employee, mainly based on their age and the cover chosen. These individual premiums are added together to calculate the total scheme premium.
- The cover chosen for the schemeThe level of cover, any optional benefits selected, the excess arrangements and, where applicable, the choice of hospital list can influence the premium.
- The scheme’s claims historyDepending on the insurer and the size of the scheme, claims made under the scheme can affect the premium at renewal.
Using an intermediary
An intermediary can compare company scheme options and request quotations on your behalf.
Ways to adjust a premium
Choices that affect your premium
- A voluntary excessChoosing a voluntary excess can reduce your premium, with higher excesses generally producing lower premiums. Not every policy offers one.
- Benefit limitsSome benefits may have a choice of limits. A lower limit can reduce the premium, but it also reduces the amount that can be claimed.
- A hospital listSome policies offer a choice of hospital list. A more restricted list can lead to a lower premium.
- Optional benefitsSome policies allow you to add optional benefits to the core cover for an additional premium. Choosing not to include these benefits avoids the additional cost, but also means you will not have the cover they provide.
Consider the impact on your cover
Health insurance cost FAQs
Frequently asked questions
There is no single price for private medical insurance. Premiums depend on the people covered and the policy chosen, so they can vary considerably. This page explains the main factors.
Not necessarily. You pay the premium whether or not you claim, and over time, the premiums you pay could exceed the cost of any treatment you receive. Insurance is a way to manage the risk of substantial treatment costs, subject to the terms of the policy.
Yes. Premiums are normally reviewed each year and may be affected by factors including age, claims experience, medical costs and general inflation. How this works depends on the insurer.
Insurance premium tax (IPT) is a government tax added to the cost of general insurance policies. Insurers collect it and pass it directly to the government. In the UK, private medical insurance premiums are generally subject to IPT at the standard rate of 12%.
Next steps
Explore our health insurance products
Find out what each product covers and who it is designed for. An independent intermediary may be able to advise you on which cover is suitable for your needs.
This page contains general information about how private medical insurance is priced. It does not describe the pricing of any particular Freedom Health Insurance product, and it does not constitute a personal recommendation or advice about the suitability of any policy. All cover is subject to the policy terms, conditions, limits and exclusions.