Introduction to Health Insurance Excess Options.
Making a financial contribution towards your claims reduces the insurer’s risk and hence your premium. If you choose a health insurance excess of £100 then you are responsible for paying the first £100 of a claim, however as with all things health insurance nothing is as simple as it appears. In this article, we will explore all of the excesses and shared responsibility options currently available.
Why have an excess?
- Some policies enforce a compulsory excess.
- Voluntarily increasing the amount that you are prepared to pay towards claims will reduce your premium further.
- In the event of recent or ongoing claims then increasing your contributions to future claims is the only way to reduce premiums without reducing your level of cover.
- For Group or Company schemes, requiring a financial contribution deters members from ‘overusing’ the policy. Multiple smaller claims may push up the renewal premiums.
- If you are happy to pay for lower cost private healthcare, like out-patient consultations and you can make significant contributions to your health care costs, then you could take out a medical insurance policy with a larger excess of £1000-5000.The resultant policy would insure you against the major costs of extended hospital stays or complicated treatments for a lower premium.
Types of Excess, Co-responsibility or Shared Responsibility:
1) Excess per person per policy year
A “per person per policy year” excess means that if you claim you will have to pay your excess contribution up to your chosen limit and this will apply once for that person during the policy year.If your partner or another employee on a company plan makes a claim, then they will be liable for their own excess contribution.
Examples of a £250 excess per person per policy year;
a) Claim £150 and it is your first and only claim of the policy year. In this scenario, you would pay the full £150 because it it’s less than your £250 excess liability.
b) Claim £750 and it is your first claim of the year. In this scenario, you will be liable for the £250 excess and the insurer will pay all further claims in the policy year, within the terms of the policy.
c) Claim £150 and it is your first claim of the year. In this scenario, you would pay the full £150 because it it’s less than your £250 excess liability. You then make a second claim in the same policy year for £3500. Now the insurer will pay £3400 and you must pay £100 which is the remainder of your £250 excess for the policy year. Your maximum excess liability in the policy year is £250.
2) Excess per claim
An “excess per claim” means the excess will apply to each unique claim. With this type of excess, more of the risk is transferred from the insurer to the policyholder and will normally result in a lower premium compared to an excess “per person per policy year”. However, this could mean that you’ll pay your excess on multiple occasions during a policy year. In addition, the terms of the policy may state that after a set period (12 months for example) an ongoing claim will once again be classified as ‘new’ so the excess will be payable again.
3) Rolling Excess
A rolling excess refreshes independently of your renewal date. With a rolling excess, once you’ve contributed your chosen excess liability within a 12-month period you will earn a 12-month period ‘excess free’. For example, you have a £1000 rolling excess and you claim three times in 12 months for £250, £500 and £500. You’ll pay the first £1000 but you’ll now have a 12-month period excess free from the date of the last claim. The excess will refresh again after this time.
4) Co-responsibility or Shared Responsibility
If you choose a £250 excess and make the first claim of £200 then you will get no return from your policy. However, if you have a £250 “Shared Responsibility (SR)” which is sometimes called a “co-responsibility”, then for the same £200 claim you would get a return.SRs, like excesses, can vary from as little as £250 up to many thousands. Typically, when you claim you contribute of 25-35% of each claim until you’ve reached your chosen SR limit. After this point, the insurer will pay 100% of claims until the next policy renewal. SRs are usually per person per policy year.
Examples for a £250 SR at 25% contribution;
a) Claim £100 and it is your first and only claim of the year. In this scenario you would pay 25% – £25, and the insurer will pay 75% – £75. You’ve now contributed £25 of your maximum liability of £250 leaving £225 remaining.
b) You make a second claim in the same policy year for further £900. Now you pay 25% – £225 and the insurer will pay 75% – £675. You have now paid your full £250 SR.
c) You then make another claim for £1200 and as you’ve paid your maximum SR the insurer will pay all of this claim and any subsequent claims in the policy year.
General points to bear in mind:
- For individual and family policies some insurers allow you to “buy back” claims to protect any no claims discount (NCD). For instance, if you’ve made a claim of £500 which the insurer has paid you could decide to pay this yourself to protect your NCD and keep claims related premium increases down.
- Check to see if the excess amount reduces any financial limits on the policy. For instance, if you have a £250 excess and a £1000 limit for out-patient claims is the excess deducted from £1000 limit or in addition to it?
- Always process a claim even if it’s below your excess level. This means that if you require further treatments then you’ve already contributed towards your excess or shared responsibility.
- Insurers usually count a claim at when they pay the bill and not when you contact the claims team to start the claim.
It is not always immediately obvious which type of excess has been offered. If in doubt be sure to ask! Ashley Woodrow, January 2018