Private health insurance: the essentials

Private medical insurance is seen as essential by many but it is a luxury? We explore the facts.

Private medical policies provide cover for the costs of private medical treatment for curable, short-term medical conditions.

Essentially, medical insurance allows you to jump long National Health Service queues for minor, non life-threatening conditions.

Poorly informed: Should you get private medical insurance? We explain the facts.

It is not an alternative to the NHS; private hospitals do not have casualty departments, for example.

Neither do you necessarily get better care, although with the best policies you may get your pick of hospital and doctor - but you do get it more quickly and at a time and place to suit you.

Who and what is covered

Private medical insurance (PMI) will cover the cost of specialists, surgery, accommodation and nursing bills in a private hospital, or in a private ward in an NHS hospital, drugs and X-rays. You will get better facilities, tastier food and a private room, often with a phone and television.

Generally, policies do not cover the treatment of long-term illnesses that cannot be cured, such as asthma, diabetes or multiple sclerosis, or pre-existing medical conditions. This means you can't buy medical insurance today for an operation you know you will need in a few months.

Policies generally refuse to pay for treating conditions like alcoholism/drug abuse, dental treatment (although this is sold separately), HIV/AIDS, infertility, normal pregnancy or cosmetic surgery.

Some insurers will accept new customers at any age, others have an age limit. But the older you are, the more expensive it is. This means it tends to price people out of the product just when they need it most.

You will need to decide what sort of cover you want. There are a number
of things you will have to consider.

What should you consider when taking out PMI?

  • How much do you want to spend?
  • Do you want to pay for part of your treatment?
  • Do you want your cover to include seeing a specialist and having diagnostic tests (for example, X-rays and blood tests) as an outpatient?
  • Do you want a choice of hospitals, or would you be happy to have any treatment that you might need, in a hospital available from a limited range chosen by your insurance company?
  • What am I not covered for?

The cost

Costs depend on what type of plan you choose and whether other family members are included. The more comprehensive the range of treatments covered, the more expensive it is. Also, if you want to be treated in top private hospitals or the London teaching hospitals, it will cost you more.

Many policies come in three classes, depending largely on your choice of hospital. Remember that premiums for private health insurance tend to rise faster than inflation.

If you want to save money you should consider a budget policy, which applies only if the treatment you need is not available on the NHS within a set period.

Other ways of keeping costs down include paying a larger portion of the claim than normal, or by agreeing to accept a restricted choice of hospitals.

Some policies offer no-claims bonuses that can help limit the increase in your premium. This gives you an incentive not to make minor claims, which always account for the majority of claims.

You could also try to persuade your employer to offer it as a perk. That way, administration costs are kept to a minimum and the employer may well be able to negotiate bulk discounts or more generous terms.

Compare health insurance

If you're thinking about taking out health insurance then you can use our insurance finder to compare policies.

Around half the people with private medical insurance get it as a perk. Bosses prefer it because it means that performance of key staff is not hit by nagging conditions that could be quickly treated.

Private medical insurance is taxed as a perk if you earn above a certain amount a year.

If your private medical insurance is included as part of your employment contract and you retire you will have to renegotiate your policy, but you are likely to qualify for discounts. Bear in mind that the over 60s no longer get tax relief on private medical insurance.

Medical history

You do not necessarily have to reveal your medical history but some policies might ask you to fill in a form with the details of past illnesses and operations. Others may write to your doctor for more information. Make sure this form is accurate and you've given all the information requested. Otherwise the insurer might not pay your claim.

If you have a medical condition that could recur, the insurer will probably take you on but will normally exclude that condition. With others, you will not be asked about your medical history. Instead, the insurer excludes cover for any medical condition or a related one that existed in the last (usually) five years.

These conditions become eligible for cover only when you remain free of symptoms, treatment, tests or medication for that condition for a period after your policy starts. Remember that recurring, incurable symptoms are unlikely to ever be covered because they will always require regular treatment or tests.


When your GP has told you that you need treatment, he will arrange a private appointment with a consultant. Get a quote for this and then contact your insurer. But make sure that the insurer will pay all the costs, and do not start treatment until you know where you stand.

Some policies, for example, have limits on how much they will pay for specific forms of treatment. Some insurers settle bills direct with the hospital rather than requiring you to pay and claim money back.

Just in case...

  • Before buying a policy you check that the insurance company is regulated by the Financial Services Authority. 
  • All insurers must treat sensitive and personal information, particularly medical details, with confidentiality. 
  • You will have 14 days from the receipt of your policy documents in which to decide whether the product is suitable for you. You are entitled to a full refund if you cancel within the stated period.

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