Private Health Insurance Excess Explained: How It Works and What to Choose

The excess is one of the most important — and most misunderstood — parts of a private health insurance policy. Get it right and you can cut your premium meaningfully without weakening the cover that matters. Get it wrong and you either overpay every month or face a bigger bill than you expected at claim time. Here’s a plain-English guide to how the excess works and how to choose it.

What an excess actually is

The excess is simply the amount you agree to pay towards a claim before your insurer pays the rest. Say you have a £250 excess and a covered treatment costs £2,000 — you’d pay the first £250 and the insurer would cover the remaining £1,750. It’s the same idea as the excess on your car or home insurance: you take on a slice of the cost in exchange for a lower premium.

Why it lowers your premium

When you agree to a higher excess, you’re taking on more of the smaller-claim risk yourself, so the insurer’s exposure falls — and they reward that with a lower monthly premium. It’s one of the most direct levers you have over the price. The bigger the excess you’re comfortable with, the more you generally save each month.

Think of the excess as a dial: turn it up and your monthly premium falls, but you pay more if you claim; turn it down and the reverse. The trick is setting it where the trade-off suits you.

Per year or per claim? This bit matters

Here’s a detail that catches people out: how often the excess applies. Most UK insurers apply the excess per policy year — so you pay it once in a year, no matter how many claims you make in that year. Some, though, apply it per claim or per condition, which can add up if you have several separate issues. Always check which model your policy uses, because it makes a real difference to what you’d actually pay.

How to choose the right excess

There’s no universally “correct” excess — it depends on your finances and how you think about risk. A few guiding questions:

• Could you comfortably pay the excess if you needed treatment tomorrow? If yes, a higher excess is often smart — you pocket the monthly saving.
• Are you mainly insuring against big, serious events (surgery, cancer)? Then a higher excess makes sense — the excess is small relative to the treatment, and you keep the important cover while cutting the premium.
• Would an unexpected few hundred pounds be a stretch? Then a lower excess buys you peace of mind, at a higher monthly cost.

A worked example

Imagine two versions of the same policy: one with a £100 excess, one with a £500 excess. The £500-excess version might save you a noticeable amount each month. If you go years without claiming, that saving adds up nicely. If you do claim, you pay £400 more towards that one claim than you would have — but you’ve likely already saved more than that in premiums along the way. For many people insuring against the big stuff, the higher excess wins over time.

The mistake to avoid

Don’t choose an excess so high that you’d hesitate to claim when you actually need to. The whole point of cover is to use it when something’s wrong; if your excess is set at a level that makes you put off treatment, it’s working against you. Set it high enough to save money, but low enough that you’d never think twice about claiming.

Get the balance right for you

Because ComparePMI uses a wide panel of insurers, we can show you exactly how different excess levels change your premium across multiple insurers, and help you land on the balance of cost and cover that fits your situation. It’s free, impartial, and there’s no obligation.