Excesses explained: how to reduce health insurance cost

A health insurance excess is the amount you agree to pay towards the cost of treatment each time you make a claim, before your insurer pays the remainder. It works in a similar way to excesses on car or home insurance.

Choosing your excess level is one of the main ways to reduce health insurance cost without giving up the cover that matters most. Insurers typically offer excess options ranging from £0 up to £1,000 or more, and the level you choose has a direct effect on your monthly premium.

The basic principle is simple: the more you agree to pay towards a claim, the less risk your insurer takes on, so the lower your premium. It's worth thinking through the trade-off carefully before committing to a higher excess than you could comfortably afford.

When you're approved for treatment and your insurer authorises a claim, you pay your excess towards the cost and the insurer covers the rest, up to the limits of your policy.

Per claim vs per policy year

Excesses are usually applied in one of two ways:

• Per claim excess: you pay the excess amount every time you make a new claim for a different condition
• Per policy year excess: you pay the excess once during your policy year, no matter how many claims you make

A per policy year excess is generally more favourable, especially if you're likely to need treatment for more than one condition in the same year. Check which basis applies before comparing quotes, as it can make a bigger difference to your overall cost than the headline excess amount.

Does the excess apply to every type of treatment?

Most policies apply the excess to in-patient and day-patient claims. Some policies also apply it to out-patient claims, while others waive it for certain treatments, such as cancer care. Always check your policy documents, or ask your insurer, to confirm exactly when your excess applies.

The exact saving from choosing a higher excess varies between insurers, your age, and your overall level of cover, but the general pattern is consistent: the higher the excess, the bigger the reduction in your premium.

These are typical ranges rather than guarantees. Speak to an advisor to see how different excess levels affect the premium on your specific policy, as the saving can vary depending on your age, location, and chosen level of cover.

There's no single right excess for everyone. The best level for you depends on your budget, your savings, and how likely you think you are to claim.

Before choosing a higher excess to reduce health insurance cost, it helps to ask a few honest questions:

• Could you pay this amount at short notice if you needed treatment tomorrow?
• Do you have savings set aside that could cover the excess without financial strain?
• Are you choosing a high excess purely because it looks cheaper, or because you've genuinely thought through the trade-off?
• Would a mid-level excess (such as £250 or £500) strike a better balance between monthly cost and affordability if you claim?

If you're on a tighter budget and would struggle to find a large lump sum, a lower excess with a slightly higher premium is often the safer option. If you have savings set aside and are unlikely to claim frequently, a higher excess can be a sensible way to keep your monthly cost down.

Your excess is one of the biggest levers for controlling your premium, but it's not the only one. If you're looking to reduce health insurance cost further, consider combining a higher excess with some of the options below.

A higher excess can be a smart way to reduce health insurance cost, but only if you choose it for the right reasons. These are the most common mistakes people make.

Choosing the highest excess purely for the lowest quote

The cheapest quote isn't always the best value. If a £1,000 excess would be difficult to find at short notice, the saving on your premium could be outweighed by the stress of paying it when you actually need treatment.

Not checking whether the excess is per claim or per policy year

A policy with a lower headline excess but a per-claim basis could end up costing more overall than a slightly higher excess applied once per policy year, especially if you claim for more than one condition.

Forgetting to review your excess at renewal

Circumstances change. An excess that made sense a few years ago might no longer suit your savings or budget. Reviewing your policy each year, ideally with an advisor who can compare a wide range of insurers, helps make sure your excess still fits your situation.

Assuming a higher excess affects what's covered

Your excess only affects how much you contribute towards a claim, not what your policy covers. Changing your excess doesn't add or remove any exclusions, so it's a genuinely low-risk way to manage your premium as long as you can afford the amount you choose.