Health insurance can be complex and so it is important to understand how the policy works before choosing the type of policy you should get. The type of health insurance you buy should be dictated by the premium you can afford and the importance that you place on the benefits included. In this article, we explain how health insurance works using a simple step-by-step guide. We explain the options available as well as providing guidance on the type of policy that may be best for you.
Step 1 - Choose your level of cover
The first decision to make is the level of cover that suits you best. Most health insurance providers offer three levels of cover which can be broadly defined as basic, intermediate or comprehensive.
Basic Cover - Good for those on a smaller budget
Generally only covers the cost of surgery, treatment, medication and accommodation. This type of cover does not include any diagnostics such as consultations and scans. If you are generally happy with the NHS and want a simple policy that will cover you for conditions that may require surgery, then this policy could work for you. We compare the cost of various types of health insurance policy in our article 'How to compare the best health insurance policies in the UK' and the average cost of 'basic' health insurance is between £25 and £40 per month, depending on the excess you choose.
Intermediate Cover - Good for those who want to skip NHS queues
This type of health insurance will cover the cost of surgery, treatment, medication and accommodation. In addition, it will include the cost of diagnostics up to a certain limit. The limit is at the discretion of the insurance company and it is likely to be different depending on the insurance company you choose. The average cost of 'intermediate' health insurance is between £35 and £60 per month, depending on the excess you choose.
Comprehensive Cover - Good for those who want full coverage
Comprehensive health insurance will cover the cost of surgery, treatment, medication, accommodation and there is no limit to the number of diagnostics you are covered for. Premiums for this type of health insurance cover are more expensive and the average cost is between £40 and £80 per month.
Step 2 - Choose your excess
Excess is the amount you have to pay towards a claim. The higher the amount of excess you choose, the less you will pay in monthly premiums. It is important to choose the excess that works best for you. If you are relatively healthy and have an emergency fund to fall back on, then you may want to choose a higher excess. Conversely, if you think there is a high probability of claiming and you have limited savings then a lower excess may be better. Below we list the excess options available for most health insurance providers.
- No excess - Good for those who are worried about claiming multiple times on a policy. Premiums are likely to be expensive when compared to policies with a higher excess amount
- £100 - A good solution for those who want to bring the cost of premiums down
- £250 - Good for those who want to strike a balance between cheaper premiums and who cannot afford the highest amount of excess
- £500 - Good for those who have access to savings and want to bring down the cost of monthly premiums
- £1,000 - This option will ensure the cheapest premiums but you will be paying a hefty amount towards each claim.
Step 3 - Choose your policy type
Next, you'll need to consider whether to buy health insurance that covers just you, or whether you want to add other people to the policy. The more people you add to the policy, the more expensive it becomes. You'll need to decide between single, joint, family or child-only cover. We explain family and child-only health insurance in more detail in our article 'Which is the best family health insurance policy?'
- Single - The cheapest type of cover and provides cover solely for the policyholder
- Joint - Worth looking at if you and a partner are considering buying health insurance as it can work out cheaper.
- Family - Good for those who want to provide health insurance for the whole family
- Child-Only - A policy for a child or children that is paid for by an adult. This is a specialist product that is not available on most comparison sites. You'll need to speak to an independent specialist, read on to find out how.
Step 4 - Choose how you want your policy underwritten
There are two ways to apply for health insurance. You can apply on a 'moratorium' basis or you can choose to be fully underwritten. We explain what each of these terms means below, as well as which option may suit you best. Alternatively, if you already have an existing health insurance policy, you can request that your existing policy is transferred over to the new provider.
Moratorium Underwriting - Good for those who want to be covered straight away
Moratorium underwriting only requires the applicant to answer a few simple questions in order to be fully covered. The application process is quick and simple, however, it is important to note that any condition that you have received consultations, tests or treatment for in the last five years would be automatically excluded for a period of time. The moratorium period can be different depending on the insurance company, with some companies reducing the moratorium period to two years. It is for this reason that we would suggest that you speak to an independent specialist to work out which health insurance company is best based on your own circumstances. We explain the best way to do this below.
Full Medical Underwriting - Good for those who want clarity on what they are covered for
Full medical underwriting is where a health insurance provider will conduct a full medical assessment before deciding whether they can offer you cover. You'll need to fill in an in-depth questionnaire and it is likely that the insurance company will write to your doctor, as well as any consultants or specialists. Once underwritten, the insurance company may decide to apply certain exclusions to the policy for pre-existing medical conditions. This option is only usually recommended for those that have a complex medical history or those that want to know exactly what they are covered for before taking out a policy.
Step 5 - Choose your optional benefits
Most health insurance providers allow you to tailor the policy to match your specific needs. Optional benefits can be added to your policy, each coming at an additional cost. Below we have listed some of the most popular 'optional' benefits available.
- Additional therapies - Can provide additional cover for therapy providers such as osteopaths, chiropractors, physiotherapists, acupuncturists and homoeopaths
- Advanced cancer cover - Most health insurance policies come with an element of cancer cover which pays towards the initial diagnostics and early stages of treatment. There is an option with some providers to bolster this cover by taking out advanced cancer cover which provides ongoing care.
- Dental cover - Provides additional cover for dental treatment
- Extended hospital network - Gives the policyholder access to a larger number of hospitals
- Mental health option - Comprehensive mental health cover with no limits on psychiatric treatment with psychologists and cognitive-behavioural therapists
- Travel option - Can provide access to treatment worldwide
Step 6 - Choose your health insurance provider
Once you have completed steps 1 to 5, you should have a better understanding of the type of health insurance you may need. Now is the time to get a quote and see who the best health insurance company is for your specific needs. Many people make the mistake of choosing the provider first, either because they have seen an advert or because they have been recommended by a friend. The truth is that the best health insurance policy for you is likely to be a very different policy than the one best suited to your friend. We would recommend that you speak to an independent health insurance specialist, such as Assured Futures* whose service we have vetted. Assured Futures has access to every health insurance provider on the market. By speaking to one of its advisers, you'll be speaking to someone who has your best interests at heart and who will tailor a policy based on the benefits that are important to you. Also, the company promises to match the price of any like for like quote you receive from elsewhere, or it will give you a £50 voucher.
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