Why private medical insurance can be cheaper than you think

It's possible to get a cheaper private medical insurance policy, but make sure you understand what you might be sacrificing.

Private medical insurance might be cheaper than you think

If you're looking for or already have a PMI policy but the cost is becoming prohibitive, shop around to see if you can save.

Just make sure you read the small print to ensure you understand what's included and not included for the price.

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Most insurers offer three levels of cover: comprehensive, standard and budget.

Budget plans trim your costs by excluding outpatient treatment such as initial diagnostics and consultations, which you can get free on the NHS if you're prepared to wait and excludes things like alternative therapies.

But you are still fully covered for serious inpatient treatment, anything from a hip replacement to cancer care.

Alternatively, you could choose a plan targeting specific illnesses such as heart disease or cancer to lower costs.

Excesses and no-claims

When you take out motor insurance or home insurance policy, you can cut your premium by agreeing to pay the first £50 or £100 (or more) of a claim. The same principle applies with private medical insurance.

A small excess of just £100 or £250 in each policy year or each claim could slice 10% to 20% off your premiums. The higher the excess, the lower your premium.

Some insurers take the principle to extremes, with excesses in the thousands, but this means you are only likely to claim for major illnesses.

Many insurers also offer no-claims discounts, which can hack up to two-thirds off your premiums. Just make sure you're not put off claiming vital treatment by the prospect of losing your no claims.

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Co-insurance or shared responsibility plans cut your premiums if you agree to pay a share of any treatment costs. Insurers believes this helps cut frivolous claims, and pass on the savings to you.

Some insurers pay part of your premium into a deposit account in your name, with the remainder set aside to fund any treatment.

When you claim, you pay a percentage of the cost from your personal deposit account and the insurer pays the rest, up to cover limits. If you don't claim, the money in the deposit account is yours (although the account doesn't pay interest).

Other ways to save

There are plenty of other innovative plans available.

Some insurers provide you with a pot of money for necessary medical treatment. You can either spend this on private treatment, or seek treatment on the NHS and pocket the cash instead.

Others offer you reward points for healthy living, such as eating salads and going to the gym, which reduce your premiums.

Finally, there is nothing stopping you from setting up your own savings fund to cover private treatment, and self-pay at a private hospital chain if the NHS waiting list for your condition is far too long.