Health insurance guide

What is private health insurance?

Private health insurance (also known as private medical insurance) covers the expenses incurred when you undergo private medical treatment for short-term, curable illnesses and injuries. Levels of cancer care vary between policies, so check with your provider before purchasing cover.

People in employment often have the option to join a company sponsored scheme, at a minimal cost but if you buy private health insurance yourself it can be quite expensive, which is why it’s important to understand the different types of health insurance policy and levels of cover available.

Critical illness cover can provide an alternative to private medical insurance, as it pays a lump sum on the diagnosis of a series of set conditions - you can see our critical illness cover guide for information on critical illness insurance.

Types of health insurance

Standard

A good option if you want full peace of mind and access to a lot of the benefits of private health insurance. Standard health insurance plans include full cover for most in-patient and out-patient treatments. In addition, many also cover alternative therapies such as acupuncture and osteopathy.

Budget

There are also a number of budget types of health insurance available, which cost less than standard health insurance policies as they limit the amounts paid for in-patient treatment, and offer a lower level of cover for out-patient treatment, without providing many of the additional benefits of private health insurance.

Six-week plans

Six week plans are cheaper than standard policies because they will not pay for in-patient or day-patient treatment if it is available on the NHS within six weeks.

Health insurance is a complex product (there are approximately 25 providers all offering very different levels of cover), so it is worth taking advice from an independent financial adviser on the best one for you. Before doing so, check that you haven’t got health insurance through your workplace as an employee benefit.

Benefits of private health insurance

The difference between the three types of health insurance policy can be difficult to decipher, so here’s a sample of the policy benefits that will differ most between comprehensive and budget cover:

The NHS option

Certain cheaper 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 six 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. ‘Six-week plans’ will exclude this option.

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 of London

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

Band D: A pay bed in a NHS hospital ward.

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

Out-patient treatment

Comprehensive policies will cover the costs of most (but not all) out-patient treatment and other additional expenses such as home nursing or private ambulance transport. Budget policies sometimes, but not always, exclude out-patient treatment altogether.

Pre-existing conditions

A standard policy will normally exclude all conditions suffered before the commencement of the policy, calling them ‘pre-existing conditions’. This can often be a barrier to changing insurer because a new insurer will want to exclude you on either a permanent or temporary basis.

Some policies will offer treatment for pre-existing conditions, but with the proviso that you remain ‘treatment-free’ for a certain period of time after the policy starts. These policies are referred to as ‘moratorium policies’.

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;
• no medication or special diets have been prescribed.

In-patient treatment

Typically, policies cover a core set of in-patient 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.

Cancer care

As new, expensive treatments for cancer appear, it is becoming more likely that the best treatment may be unavailable on the NHS. Health insurance can be a good way of covering the cost of cancer care, but the level of cover varies from policy to policy.

Dental insurance

Dental insurance is usually offered as a standalone policy, and not as one of the benefits of private health insurance. Before purchasing dental insurance, check whether your employer provides this for you as an employee benefit, either as part of a private medical insurance plan or as a standalone dental policy.

If you decide to purchase dental cover yourself, you will probably be offered a ‘capitation’ scheme, whereby you make regular monthly payments based on your expected level of treatment.

The dentist that you register with will give you an oral assessment to assess the state of your dental health and the amount of treatment you are likely to require. There is also a one-off registration fee to pay in the first month of your contract to cover administration costs.

The plan covers all normal routine dental care including check-ups, fillings, X-rays and preventive care, but not cosmetic dentistry. It also includes supplementary cover towards the cost of treatment required as a result of accidents and emergencies.

The average cost tends to be around £16-£20 a month, depending on your oral health and your dentist’s level of charges.

Health insurance exclusions

As well as the varying benefits of private health insurance, different policies have different exclusions. But the following are generally not covered:

• chronic (meaning long standing or incurable) illnesses, such as back pain;
• 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;
• GP services, accident and emergency admissions, outpatient drugs and dressings and mobility aids;
• psychiatric treatment, treatment for anxiety and depressive disorders, and pregnancy complications are frequently excluded.

Tips when purchasing private medical insurance

• 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 independent financial advisor for advice. If you buy private medical insurance without taking advice and something goes wrong, you won’t have any means for redress.
• Private health insurance is an annually renewable contract. Your premiums will usually increase because of age, the insurer's claims experience and advances in medical care.
• 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% for agreeing to pay the first £100 of any claim.
• As an alternative to health insurance, cash plans can be considered, as they refund (or partially refund) the cost of optional treatments and check-ups.

Hopefully this health insurance guide has outlined some of the key aspects of private medical insurance and dental insurance; so that you can be sure of what level of cover you require and don’t end up with a policy that isn’t right for you.