Revealed: The truth about health insurance policies

We look at the benefits and exclusions of private medical insurance, and say what you can expect to pay.

Private medical insurance, aka health insurance, isn't a priority for most UK residents, thanks to the NHS. Many of us should consider as a higher priority the similarly named 'permanent health insurance' (which protects your income if you become too ill to work). Life insurance (which protects your dependants if you die) and buildings and contents insurance may also be a higher priority for many families.

Yet there are benefits to private medical insurance. You can get better or faster service, more facilities, and you can get a second opinion if you're not convinced by your NHS GP's advice.

I've found reasonable evidence in the past that private medical insurance is, on average, sold at a fair price for the cover it provides, but there are many different levels of cover, so today I'm going to explain some of the sorts of policies you can get and the prices you might expect to pay.

What's not normally covered?

The Association of British Insurers explains that it is for acute conditions, which are curable problems that should respond quickly to treatment aimed at restoring you back to health.

Insurance is often better defined by what isn't covered than what is. Private medical insurance is not for all conditions. You don't normally get cover for GP services, for accident and emergency, or for health checks. This insurance is not normally for chronic conditions – long-term illnesses that can't be cured.

Nor is it for pre-existing conditions – conditions you're already suffering from. An insurer will normally either refuse cover for conditions that you had previously which are likely to return, or for conditions you had in the past five years. However, some policies cover pre-existing conditions as standard and some offer the option of covering specified pre-existing conditions for an extra cost. Other policies may grant you cover for these conditions after two years of getting no medical advice or treatment on it (through the NHS or privately).

There are other typical exclusions such as medical care related to drug abuse, organ transplants, normal pregnancy, and injuries from dangerous hobbies.

Sometimes there are limits to the amount of cover, too. A policy covering physiotherapy may set a limit of £250, for example.

When choosing or switching policies, look to see how the cover differs; don't automatically buy the cheapest policy. One policy might cover diagnostic tests whilst another similar one won't, to take one of many examples. Before you switch, if you've got an ongoing claim, check whether the new insurer will cover you for it, as you may find it won’t.

Prices

Below I shall split private medical insurance into different levels of cover and give you a rough guide of the best shop-around prices. These price guides are based on a 35-year-old non-smoker with no policy excess. A 45-year-old might pay about 25% more and a 65-year-old might pay 2.5 times more, according to the Association of British Insurers' estimates.

In the comparisons I've looked at, couples seem to pay the same each as buying separately, but families tend to cost less per person. If you want to choose from any hospital and specialist rather than from a smaller list that an insurer offers, or if you want to specify a private room (perhaps with en suite bathroom) instead of a small shared one, you'll probably also need to pay more. If you want cover overseas or alternative therapy you'll normally have to pay a higher premium too.

Generally, price goes up each year and historically they have done so faster than inflation. However, the number of claims you've had shouldn't affect the premium (unless you take a policy with a no claims discount, but they're not necessarily the cheapest overall or the most suitable for you).

Now I'm going to look at various levels of cover and their prices.

In-patient and day-patient treatment

You normally get in-patient and day-patient treatment covered as standard. In-patient treatment is when you stay in the hospital overnight and day-patient treatment is when you need to go in during the day for a supervised recovery. Most policies offer cover for both of these, including in-patient tests, surgery as an in-patient or day-patient, and nursing.

For an in-patient policy covering hospital charges, specialists' fees, diagnostic tests and physiotherapy, you might pay £16pm to £20pm if you shop around.

Out-patient treatment

Some policies add to the above by extending cover to out-patients. You're an out-patient when you're treated at a hospital (or another medical facility) but don't stay for supervision during the day or overnight. Depending on the policy, you could get cover for out-patient diagnostic tests, and out-patient consultations and treatments. Your GP will usually have to refer you for this sort of treatment before your policy will cover you.

Bear in mind that while it's the norm for out-patient consultations to be covered, but not out-patient surgery. That's perhaps not as bad as it sounds, as any serious surgery will usually be in-patient surgery or emergency surgery. The policies covering minor out-patient surgery usually cost more.

Interestingly, the cheapest policies including in-patient, day-patient and out-patient cover can also at the moment be bought for less than £20pm. However, to get more comprehensive cover, e.g. with chemotherapy and psychiatric care, you may have to pay between £20pm and £30pm.

Sometimes you get cover for out-patient treatment, but it’s capped at say £1,000 a year. Believe it or not, that won’t go very far when it comes to private treatment – a single consultation and a few diagnostic tests can easily add up to £500. So check the small print carefully.

Furthermore, any prescriptions you are given by a private consultant will not be NHS-subsidised, i.e. you will have to pay the full price of the medicine, which can be £50+ in some cases. This will not be covered by your policy in most cases. However, your GP may kindly agree to write an NHS prescription for you if you bring in proof you’ve been prescribed it privately.

Comprehensive policies

You can get policies offering all the above and more, such as: nursing at home, private ambulance and minor out-patient surgery. These might cost about £45pm to £50pm, if you shop around.

Health cash plans

We also have health cash plans. These are a little different to private medical insurance in what they do. They often pay you cash for everyday health expenses. This might be for visits to the opticians or the dentist, for health checks, giving birth, alternative therapies and perhaps specialist consultations.

If you like to have lots of check-ups and are on the phone to your doctor at the first sight of a problem, or if you like alternative treatments not covered by the NHS, you might find such a policy cost-effective. Typically they cost £10pm to £20pm.

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