Defaqto

Type of policy

Premiums vary considerably according to the level of cover provided and the deferment period (the length of time you have to wait before being treated). A standard policy will normally exclude all conditions suffered before the commencement of the policy, because they are ‘pre-existing conditions.’

Pre-existing conditions can often be a barrier to changing insurers because a new insurer will want to exclude them either permanently or temporarily as well.

Moratorium policies cover pre-existing conditions, but only after a specified treatment-free period has elapsed (typically two years), from commencement of the policy.

The definition of ‘treatment-free’ can be quite strict but usually means that during the moratorium period:

• there have been no consultations with a doctor concerning the pre-existing, or any related, condition;
• no advice has been sought about the condition, including check-ups; and
• no medication or special diets have been prescribed.

Moratorium policies are often criticised on the grounds that they may encourage policyholders to defer necessary medical treatment in order to have their costs met by the insurer.

Benefits and exclusions

Exclusions

Apart from policy specific exclusions, the following are generally not covered:

• pre-existing conditions (many policies incorporate a ‘moratorium’ which excludes conditions for a specified period of typically two years);
• chronic (meaning long standing or incurable) illnesses, such as back pain and depressive/anxiety-related illnesses;
• conditions brought about through drug abuse, self-inflicted injuries, war risks and hazardous pursuits;
• treatment for HIV/AIDS, infertility and normal pregnancy; sex change, cosmetic surgery, organ transplant, kidney dialysis and experimental treatment and drugs; and
• GP services, accident and emergency admissions, outpatient drugs and dressings, and mobility aids.

Inpatient treatment

Typically, policies cover a core set of inpatient fees, such as accommodation costs, surgeons,’ anaesthetists’ and physicians’ fees; in-patient drugs and dressings, operating theatres, radiotherapy and chemotherapy, specialist consultations, diagnostic procedures (radiology, pathology etc), physiotherapy and prosthesis.

Outpatient treatment and additional expenses

‘Comprehensive’ policies will cover the costs of most (but not all) outpatient treatment and other additional expenses, such as home nursing or private ambulance transport.

Budget policies sometimes, (but not always), exclude outpatient treatment altogether.

As with most products and services, you get what you pay for. But the range and depth of cover varies enormously, as do premiums, so it’s essential that you shop around and understand the exact terms and conditions of the policy.

Budget PMI

Cheaper policies are available if you are willing to defer treatment for 6 to 8 weeks, during which period you are required to take NHS treatment if this becomes available.

Some providers, like Prudential offer discounts for people who make an effort to stay healthy by going to the gym and watching their diet.

PMI is a complex product and there are some 25 providers offering very different contracts so it is worth taking advice from an independent financial adviser.

Before doing so, check that you haven’t got PMI through your workplace as an employee benefit. According to the Association of British Insurers, 4.8m individuals are covered by company PMI schemes, whereas only 1.8m people buy individual policies for themselves.

PMI provided by your employer is taxable as a benefit in kind and will appear on your P11D form which lists your taxable company benefits.

Tips

• use the internet to check out the different policies on offer. Similarly priced policies do not necessarily provide the same level of cover;
• go for the widest breadth of cover for the maximum premium you can afford;
• see an IFA for advice. If you buy PMI without taking advice and something goes wrong, you won’t have any means for redress.

Private medical insurance is an annually renewable contract. The likelihood is that your costs will rise by more than inflation each year because of your age, general demographics, the insurer's claims experience, medical advances and increasing diagnostic sophistication.

Most of these factors are beyond your control, but there are choices available that can reduce your premiums.

Paying a voluntary excess

You can choose a higher excess (the pre-agreed proportion of each and every claim which you agree to pay), in exchange for a lower premium.

Discounts for a higher excess will vary by insurer, but expect to save around 10 per cent less for agreeing to pay the first £100 of any claim.

Hospital bands: Hospitals are frequently graded into ‘bands’ to reflect factors such as the quality of accommodation available:

Band A: Typically London NHS postgraduate teaching hospitals and the most expensive private hospitals;

Band B: Other NHS teaching hospitals, London private hospitals and the more expensive private hospitals outside London;

Band C: Medium-sized private hospitals and most provincial teaching hospitals;

Band D: A pay bed in a hospital ward;

Each PMI policy comes with a list of approved hospitals and your premium will reflect the costs of the band you have chosen.

Sometimes a hospital will be graded in more than one band (for instance, A and B) to reflect different types and standards of accommodation in different hospitals (room size, private or shared bathroom, and so on).

NHS option

Certain types of policy will meet private medical care costs if you cannot gain admission to an NHS hospital within a given period of time (typically for 6 to 12 weeks).

Most intermediate and comprehensive policies offer cash payments if you choose to be treated in an NHS hospital – usually at a daily rate up to a set cash limit, for a certain number of nights.

Cash/treatment limits

As an alternative to choosing a policy with full cover, you can select one with cash or treatment limits for a limited range of procedures.

Over 50s

Buying PMI once you are over 50 can be very expensive as clearly you are more likely to have pre-existing medical conditions as you grow older. Once you get to 60, you are likely to have to pay around 60 per cent more than policyholders in their 20s.

There are several ways you can tackle this problem. Some people simply ‘self insure’ – namely build up a rainy day fund to pay for their medical treatment, as and when it is required. If you find that the premiums you are quoted are prohibitive, you may have no choice.

Agreeing to a higher excess and/or one of the NHS  or budget option policies may help. In any event, it is essential to shop around and check out some of the insurers which specialise in insuring older people, such as Saga and General and Medical Foundation.