Health insurance companies will increase your premiums by 10% a year once you reach the age of 50. But wise old Fools can find cheaper cover with fantastic benefits...
As my grandfather used to like to remind me: "Old age ain't no place for sissies." And he was right. More than a two-thirds of UK adults aged 65 or over suffer from ill health, compared to just 30% of 16 to 44 year-olds.* Which is why the vast majority of health insurers whack up your premiums by 10% a year (plus inflation) the moment you hit 50.
By the time my parents reached their 60s, they found themselves spending more than £4,000 a year on health insurance. And each time they tried to make a claim, they were given the run-around by the insurance company: "Sorry Sir, that's not included. Sorry Madam, that's not available on your policy. Sorry..."
In the end, they got so fed up they cancelled the policy, and decided to pay directly for any private treatment that they need. Of course, this is a rather optimistic strategy, banking on the hope they will not need much private treatment. But so far (touch wood), they have stayed healthy -- and have also managed to build up a healthy balance with the savings they have made.
Were they right to take this approach -- and risk? Is medical insurance for people over 50 really such a complete rip-off? Aren't there any cheap options out there?
Stay Young Forever
First of all, don't assume you have to go direct to a medical insurer. You may find you are much better off using a specialist, fee-free medical insurance broker, who can search the market for the best type of policy to suit your individual needs and requirements and explain any complex schemes. After all, medical insurance companies often try to catch applicants out with sneaky exclusions and policy limits, and a broker can tell the difference between sub-standard and quality cover.
You might also want to consider the Exeter Friendly Society which offers 'age at entry pricing.' In other words, if you join the scheme at 50 your renewal premiums will be based on that age for as long you keep the cover. (The premiums will rise, however, to take account of medical inflation and 'other relevant factors.')
A Super Saver
For older policyholders like my parents, I'd recommend a truly innovative scheme called The Healthcare Deposit Account, offered by National Deposit. The only problem is, it's a bit complicated, but it's well worth trying to get to grips with.
Here's how it works:
- You contribute monthly premiums, which are split 50:50 between two different funds: a shared fund, and your own Personal Deposit Account. You decide on the level of monthly premiums you are prepared to contribute - but be warned, the less you contribute each month, the lower the maximum level of your annual treatment cover will be. This policy doesn't offer unlimited cover. On the plus side, this gives you flexibility. For example, if you are prepared to use the NHS for treatment, but want the confidence you can afford private consultations and tests, then choosing to make smaller monthly contributions could prove a good option for you.
- You then have two funds to call on in the event of a claim: the shared fund, and your own Personal Deposit Account. The percentage of each claim you contribute to (from your own personal deposit) depends on your age.
YOUR AGE | % OF CLAIM PAID BY YOUR PERSONAL DEPOSIT ACCOUNT | |||
|---|---|---|---|---|
Individual | Couple | Individual & Children | Couple & Children | |
Under 50 | 10% | 20% | 20% | 25% |
50-64 | 10% | 25% | 25% | 30% |
65+ | 25% | 40% | 40% | 45% |
- The shared fund will pay the remaining percentage of each claim, up to a maximum annual figure. This figure represents the maximum cover available to you, and as I said, depends on the monthly contribution you make to your funds. For example, if you were 64 and contributed £20 a month, you would enjoy up to £10,000 worth of medical cover a year and would pay 10% of each claim from your Personal Deposit Account. If you contributed £200 a month, you would enjoy up to £100,000 worth of medical cover a year and again, pay 10% of each claim.
One of the best features of this policy is that the money in your personal deposit account is yours. You can take it out at any time you wish. Furthermore, unlike most healthcare policies, dental and optical cover is included as standard, instead of being an expensive add-on.
To sum up, this policy particularly suits older policy-holders who:
- Want to set their own premiums at a level they find affordable.
- Want the peace of mind their premiums won't go up every year.
- Want to have some money to show for all the monthly premiums they paid, if they don't make many claims.
But also:
- Want to decide how comprehensive their private medical care policy should be.
- Want to be able to get treatment from private dentists and opticians.
An Apple A Day
Are there any good options for older people who are fighting fit and healthy, despite the grey hairs? As I explained in Why Wealthier Rhymes With Wealthier, PruHealth has pioneered a new type of policy that rewards you financially for exercising, eating healthy food and going for regular health check-ups - and the rewards apply no matter how old you are.
Whatever policy you choose, please don't just put up and shut up with high premiums. You may be older, but you're also wiser... right Mum and Dad?
* According to the Office of National Statistics
> Use The Motley Fool Medical Insurance Service to get a competitive quote on health insurance.