Private Medical Insurance: A Short, Simple Guide

Private Medical Insurance (PMI, or sometimes just called “health insurance”) aims to help you cover your costs if you go to a private doctor for treatment.

However, given that most of us have access to the National Health Service (NHS) which provides free healthcare (at the point of use), do you really need to be able to gain private medical treatment?

If so, how does PMI work and how do you go about getting yourself covered?

In this short guide, our financial advisers will be addressing the questions. Please note that this content is for information purposes only, and should not be received as financial advice. For financial advice into your own unique situation, please speak to an independent financial adviser prior to making any big decisions with your money.

PMI: An Overview

For better or worse, the UK offers a type of “dual” healthcare system where everyone can access free healthcare on the NHS, whilst those who want it (and can afford it) can opt for private treatment instead.

The latter is not free, and treatment is usually very expensive if you were to pay for it yourself. An ankle replacement could cost you nearly £15,000, for instance, whilst an Aortic valve replace/repair could exceed £28,000.

These are obviously staggering figures to look at, yet PMI aims to cover all or most of those costs – depending on the exact terms in the policy you take out.

PMI policies tend to take one of two forms.

The first is called “indemnity” and will directly pay the private hospital for the costs you incur during treatment. The second is called “cash plan”, and will hand you a lump sum to put towards your medical costs when you make a successful claim.

It’s worth mentioning a few important things at this point. First of all, some employers offer their staff access to health insurance under their employment contract.

If you are keen on having access to private healthcare, then this is an important benefit to hold onto (if you have it) or try to gain access to if you are renegotiating your pay/benefits with your employer. Otherwise, you will likely have to take out your own policy and pay the premiums yourself (which we will cover shortly below).

Secondly, you should be aware that not all conditions, illnesses or injuries are covered by even the best PMI deals. Some common exclusions include:

• Typical costs incurred during pregnancy or childbirth.
• Medical conditions you already had, prior to taking out the policy.
• Transplanting organs.
• Cosmetic surgery such as face-lifts or implants.
• You will need to carefully read through the terms of any policy offer, to ensure that you are not taking out a policy which will not cover a condition that you hope it will.

Costs

Assuming you are interested in PMI and would have to pay for it yourself, what sorts of costs are you typically looking at?

On average, British families will likely pay around £1,435 annually for PMI (i.e. around £120 per month). However, policies can be cheaper or more expensive depending on:

• The extent of the cover you want to take out.
• Where you live in the country.
• How old you are.
• Your lifestyle and current level of health.

Some of these things you cannot really change in order to reduce the costs you are looking at (e.g. your age!). Other areas are more within your control however, such as eliminating or reducing certain lifestyle choices which are putting up the premiums on offer.

Do you need it?

After all of this, you may be wondering whether PMI is really necessary for your situation.

Indeed, if you already have health insurance arranged through your employer, or if you are happy to only receive NHS treatment, then you might not need it.

It’s worth noting that if your children get sick, then the NHS should bump them to the front of the queue when you take them in for treatment. So you should not need to take them to a private hospital to get priority treatment for them.

Naturally, if you cannot afford the premiums or if you have significant personal debts (e.g. credit cards) which need addressing, then possibly this isn’t the right time to take out PMI.

However, if you can plausibly afford the PMI premiums and can find a suitable policy for your needs, then it can be a good idea. Generally speaking, you tend to get seen to more quickly when you go private, and you get access to a range of specialist treatment.

You also gain access to much more choice over who treats you, and where you get treated. It also often allows you to get a private room if you need to stay at the hospital, and there might be a greater range of drugs and treatments available to you, not on the NHS.

There are two important things which you need to remember, however, when seriously thinking about taking out a policy:

1. Bear in mind that the cost of your premiums will likely rise over time. As you get older, you are more likely to need to make a claim, so insurers typically make their premiums more expensive. Your financial plan will need to account for this.
2. You need to really check the policy, to make sure it covers your needs. Reading the small print is especially important, as you do not want to be in a situation where, one day, you want to make a claim but your insurer will not cover it.

Here at Castlegate, our independent financial advisers can help you look at PMI within the wider context of your overall financial plan, to ensure that you find a policy which offers you the best deal and aligns with your overarching financial goals.

Get in touch today to arrange a free, no-commitment financial consultation with a member of our team. We look forward to hearing from you!