If you’re considering private health insurance for the first time or thinking about switching your provider, you’ve likely come across the term “insurance excess”. But what does insurance excess mean in practice?
In simple terms, health insurance excess is the amount of money you agree to contribute towards the cost of your treatment before your insurer steps in to cover the rest. It’s a key feature of many health insurance policies and can significantly impact your monthly premiums and out-of-pocket costs.
Understanding how excess works can help you make smarter choices when selecting your policy, potentially saving you money without compromising on your access to healthcare.
What Does Insurance Excess Mean?
In the context of UK private health insurance, excess refers to a fixed amount you agree to pay toward the cost of your treatment, either per policy year or per claim, depending on your insurer’s terms.
Let’s break this down with an example:
If your policy has a £250 excess, and you require treatment that costs £1,000, you’ll pay £250, and your insurer will cover the remaining £750.
The option to include an excess is usually voluntary; you can often choose how much to set it at. And in return, insurers will typically lower your monthly or annual premiums.
Why Choose an Excess on Your Health Insurance?
There’s one main reason people opt for an excess on their policy: to reduce their insurance premiums.
The logic is straightforward: by agreeing to pay a portion of any future claim, you’re lowering the insurer’s financial risk. In response, they offer you a cheaper policy.
The Higher the Excess, the Lower the Premium
Health insurance premiums tend to decrease as the level of excess increases. For example, selecting a £100 excess may save you a little each month, but a £500 or £1,000 excess can significantly cut your policy cost, sometimes by hundreds of pounds per year.
However, this comes with a trade-off: you’ll need to cover that excess if you do need treatment. That’s why it’s important to find a balance between a lower premium and a manageable excess amount that won’t cause financial strain if you need to make a claim.
Types of Health Insurance Excess
1. Per Claim Excess
With this type, you’ll pay the excess each time you make a claim. For frequent users of healthcare services, this could add up quickly.
Example:
If you claim for three separate treatments in a year, each costing £1,000 with a £200 excess, you will pay £600 total (£200 x 3), and your insurer would cover the remaining amounts.
2. Per Policy Year Excess
This more common format means you only pay the excess once per policy year, regardless of the number of claims you make.
Example:
With a £250 annual excess, if you claim five times in one policy year, you still only pay £250 total, and your insurer pays the rest of all eligible treatment.
3. Split-Year Claims
If your treatment crosses into a new policy year, the excess may reset, depending on your provider’s terms.
Example:
Let’s say your policy renews in April, and your treatment begins in March and ends in May. You might have to pay the excess twice, once in each policy year.
It’s always worth reading your policy documents or checking with your broker to understand how your excess is applied.
How Much Can Excess Be?
The amount of excess available will vary by provider and policy, but many insurers offer a range of excess options, such as:
- £100
- £150
- £250
- £500
- £1,000
- Even up to £2,000 or more in some cases
Some policies even allow for no excess at all, which removes out-of-pocket surprises but typically results in higher monthly premiums.
The key is to choose a level of excess that suits your financial comfort zone.
How Does Health Insurance Excess Affect Claims and Policy Cost?
Aside from lowering your monthly or annual premiums, excess also plays a role in how your claims are recorded and processed.
No-Claims Discount (NCD) and Excess
Some insurers offer a no-claims discount, rewarding you for not claiming during a policy year. Providers like Aviva use a tiered scale that can give up to 75% off your base premium if you remain claim-free.
But what happens if you make a claim that’s entirely covered by your excess?
Many insurers, including Aviva and WPA, won’t count claims that are below or equal to your excess toward your NCD. This means if you pay the full cost of treatment (because it’s under your excess), your no-claims status remains protected.
If your claim exceeds the excess, it could affect your NCD unless it’s protected, more on that below.
Can You Protect Your No-Claims Discount?
Yes, many insurers offer NCD protection as an optional add-on. This lets you claim without dropping down the NCD ladder (which could increase your premium).
However, using this protection may void it for future years, so you’ll need to remain claim-free for a year before you can add it back on.
How Shared Responsibility Works
Some policies, such as those offered by WPA, use a Shared Responsibility model rather than a fixed excess. It’s a slightly different approach, combining elements of excess and co-payment.
Here’s How It Works:
- You agree to pay a percentage of every claim (e.g., 25%)
- WPA pays the remaining 75%
- Your contribution is capped annually, say at £1,000
- Once you reach your cap, WPA covers 100% of eligible treatment
An example, if you had, let’s say, a £1000 Shared responsibility
| Treatment | Claimed Amount | You Pay | Insurer Pays |
| Consultation | £200 | £50 | £150 |
| Scan | £1000 | £250 | £750 |
| Hospital Fees | £2800 | £700 | £2100 |
An example is if you reach the shared responsibility limit in the policy year (£1000)
| Treatment | Claimed Amount | You Pay | Insurer Pays |
| Consultation | £200 | £0 | £200 |
| Scan | £1000 | £0 | £1000 |
| Hospital Fees | £2800 | £0 | £2800 |
If you hit your £1,000 cap in one policy year, WPA pays 100% of any further costs that year.
Shared Responsibility resets annually and is no longer offered to new customers, but existing WPA members can retain this model if they remain on legacy plans.
AXA Health: Claim Buyback Option
One unique benefit offered by AXA Health is the Claim Buyback feature.
If you make a claim that affects your NCD, you may have the option to repay the insurer and restore your discount, essentially erasing the claim from your record.
Example:
- You’re at NCD Level 10 and make a claim.
- This drops you to Level 7.
- You buy back the claim and move to Level 11.
While this doesn’t erase the condition itself (you still need to declare it if switching insurers), it can reduce your future policy cost significantly.
Community-Rated vs. No-Claims Discount Models
Not all policies use NCD structures. Some insurers, like certain WPA plans, use community-rated pricing.
What is Community-Rated Insurance?
- Premiums are not based on your personal claim history
- Everyone in the policy pool contributes to the cost of claims
- If claims are low across the community, premiums may stay flat or drop
- If claims are high overall, premiums may rise, even if you didn’t claim
This model offers more stable premiums over time and is ideal for people who expect to claim regularly but want predictable pricing.
How to Choose the Right Excess Level
Choosing the right policy excess depends on your budget, health needs, and risk tolerance.
Ask yourself:
- Can I afford a higher excess if I need to claim unexpectedly?
- Do I prefer to pay a bit more each month for peace of mind?
- Do I want to protect my no-claims discount?
- Would a shared responsibility or community-rated model suit me better?
For those who are generally healthy and don’t anticipate many claims, a higher excess can result in significant savings. On the other hand, if you want to avoid surprise bills, a lower excess or no-excess policy may offer more reassurance.
Final Thoughts: Is Health Insurance Excess Right for You?
Understanding how health insurance excess works is essential when comparing private medical insurance policies in the UK. Whether you’re a first-time buyer, someone managing ongoing health conditions, or looking to switch, your choice of excess can dramatically affect both your monthly costs and how much you’ll pay if you need treatment.
By selecting the right balance between affordability and protection and knowing the options your provider offers (like WPA Shared Responsibility, Aviva’s NCD, or AXA’s Claim Buyback), you’ll be able to make a more informed, confident decision.
Need Help Choosing?
If you’d like guidance choosing a health insurance policy with the right excess or co-payment model, our team at Healthplan is here to help. Whether you’re just exploring or ready to switch, we can explain your options clearly and help you save today, get a quote with Healthplan.
FAQs
What does insurance excess mean on health insurance?
Insurance excess means the fixed amount you agree to pay toward your treatment costs when you make a claim on your health insurance policy. For example, if you have a £250 excess and receive treatment costing £1,000, you pay the first £250, and your insurer covers the remaining £750.
Is it better to have a higher or lower excess on health insurance?
A higher excess usually means lower monthly premiums, making your policy cheaper in the long run if you rarely claim.
A lower excess means higher premiums but reduces your out-of-pocket cost if you need treatment. The best option depends on your health needs and what you could comfortably afford if you had to claim unexpectedly.
Is it better to have a higher or lower excess on health insurance?
A higher excess usually means lower monthly premiums, making your policy cheaper in the long run if you rarely claim.
A lower excess means higher premiums but reduces your out-of-pocket cost if you need treatment. The best option depends on your health needs and what you could comfortably afford if you had to claim unexpectedly.
How does excess work if I make multiple claims in a year?
This depends on your policy:
- Per-claim excess: You pay the excess each time you claim.
- Annual excess: You pay the excess only once per policy year, regardless of how many claims you make.
Always check your policy terms to understand how your insurer applies excess.
Does paying an excess affect my no-claims discount?
If your treatment costs are less than or equal to your excess, many insurers will not count this as a claim, allowing you to keep your no-claims discount (NCD). However, if your treatment cost exceeds your excess and your insurer pays out, it may affect your NCD unless you have protection in place.
Can I change my health insurance excess later?Your Title Goes Here
Yes, many insurers allow you to adjust your excess at your policy renewal, letting you increase it to reduce premiums or lower it for more comprehensive coverage. If you’re considering switching providers, you can also choose a new excess level when setting up your new policy.
Sources:
https://www.wpa.org.uk/personal/
https://www.wpa.org.uk/personal/health-insurance/options/shared-responsibility/
https://www.wpa.org.uk/personal/health-insurance/options/
https://www.axahealth.co.uk/health-insurance/private-health-insurance/
https://www.axahealth.co.uk/health-insurance/private-health-insurance/excess/
https://www.aviva.co.uk/health/private-health-insurance/
https://www.aviva.co.uk/health/private-health-insurance/features/cover-options/
https://www.aviva.co.uk/health/private-health-insurance/features/cover-options/#excess