Did you know that choosing the right excess on your health insurance can lower your premium?
A health insurance excess (sometimes called a deductible) is the portion of any claim the policyholder pays before their insurance kicks in.
Many private health, company medical, and visitor medical insurance plans allow policy owners to set an excess amount they’ll pay upfront for certain medical services, like hospital admissions and surgical treatments.
By paying a greater upfront cost (the excess) when making a claim, you share more of the financial risk with your insurer. This reduction in the insurer’s liability translates into lower monthly or yearly premium payments for you.
Speak to an adviser, like Policywise, who can help you choose an excess that will save on insurance premiums without compromising the quality of your cover.
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How can an insurance excess lower your health insurance premiums?
Choosing the right excess amount can significantly lower your premiums if you're willing to pay a higher one.
When policyholders commit to paying a pre-set excess (the part-payment you make towards the cost of your claim), it reduces the amount the insurer has to pay out. This reciprocal benefit equates to a lower premium cost for you. Depending on your insurer and excess amount, you can get premium discounts ranging from 10% to more than 50%.
How does an excess work in health insurance?
Scenario 1: $500 excess
Samantha has a health insurance policy with a $500 excess per claims year. For her first claim, she needs hospitalisation for an eligible surgical procedure costing $5,000. Samantha pays the health provider $500 (her excess amount) while her insurer pays the rest ($4,500).
Later that year, Samantha makes another eligible claim for surgery worth $3,500. Since she has already reached her maximum excess for that claims year, she no longer needs to pay any amount. The full cost of the surgery will be paid by her insurer.
Scenario 2: $4,000 excess
David opts for a health insurance policy with an excess of $4,000 per claims year. When he makes his first claim for an eligible surgery worth $3,000, David pays the full cost of the procedure, as it is within the excess amount he has chosen. This leaves him with a $1,000 excess for that claims year.
Within the same claims year, David needs a second surgery costing $8,000. For his second claim, David pays his excess balance for the claims year ($1,000) while his insurer pays the rest ($7,000).
How will you pay your excess?
When you submit a claim, your chosen excess will be subtracted from the total amount the insurer pays for your treatment. You'll either pay this excess directly to your healthcare provider on the day of your visit or they will invoice you the amount owing.
What are your excess options?
Depending on the insurer and your plan, you can choose $0 excess or go as high as $10,000 to maximise premium discounts on your personal health insurance or visitor medical insurance plan. For family health insurance plans, insurers may allow you to set a different excess for each family member.
With company health insurance plans, employers choose the excess, which applies to all staff under that policy. Employees can elect the excess only when paying for add-ons, i.e., if they added a specialist plan to their employee-funded group medical base plan.
Do you always have to pay an excess on health insurance?
Not necessarily. The requirement to pay an excess depends on the specific terms of your insurance policy and the type of claim you’re making. Here are some scenarios where you might not need to pay an excess:
- Plans with $0 excess
Insurers allow you to select a $0 excess option, meaning you won’t need to pay anything upfront when making a claim. Your insurer covers the full cost of medical services outlined in your policy. - One excess per person, per claims/policy year
An excess is often capped at one payment per person per claims year or policy year. For example, if you have a $500 excess, once you’ve reached that amount for the claims/policy year, you won’t pay anything for subsequent claims during that period. This feature can significantly reduce costs for individuals needing multiple treatments or medical procedures. - Specific benefits with no excess
Comprehensive health insurance plans usually apply an excess to claims related to your base cover only, such as surgical and non-surgical hospital treatments, cancer care, and major diagnostic tests. An excess doesn’t generally apply to benefits such as emergency transport or home care. Some plans may even waive your excess if your claim is related to a specified critical condition.
It’s important to note that not all policies follow the same rules. Some plans have exclusions, while others have specific provisions that remove the need for excess payments. Talk to a Policywise adviser to learn more about the excess options and conditions applicable to health insurance.
Pros and cons of having a higher health insurance excess
Opting for a higher insurance excess can impact both the cost and practicality of your health insurance plan.
Pros of having a higher insurance excess
Lower premiums
Choosing a higher excess can potentially lower your health insurance premiums from 10% to more than 50%, depending on the insurer and policy. This is particularly beneficial if you’re in good health and rarely make claims.
Cost-effectiveness
You can tailor your policy to your budget and your health risk to enjoy premium discounts while remaining covered for high-cost medical expenses.
Cons of having a higher insurance excess
Higher upfront costs
When you need medical care, you’ll have to pay out-of-pocket before your insurer starts covering your expenses. For instance, with a $4,000 excess and requiring treatments valued less than that amount, you’d need to cover the cost yourself. As such, a high excess may not be feasible if you have limited savings or frequent medical needs.
Avoiding medical care
The prospect of paying a high excess might deter you from seeking necessary medical treatment, potentially leading to higher overall costs in the long term.
Tips on how to choose an insurance excess
When deciding on the right insurance excess for your health cover, think about your current personal health status, financial circumstances, and future medical needs.
You might like to consider a higher excess if:
- you rarely need a hospital: Do you lead a healthy lifestyle and believe your chances of needing hospital care are low? A higher excess might work for you, allowing you to take full advantage of discounted premiums.
- you have a financial buffer: Choosing a higher excess can be a good option if you have an emergency fund or savings to cover the upfront cost in case of a claim.
Tip:
If you want to save on premiums but aren’t ready to commit to a high excess, it’s easier to start with a lower excess and gradually increase it as your financial situation improves.
Choosing a higher excess and later reducing it may be regarded by your insurer as a new insurance application or a cover upgrade. This could impact your cover terms and conditions, including waiting periods and exclusions.
For personalised guidance, a Policywise adviser can help you weigh the pros and cons, ensuring you choose an excess amount tailored to your budget and health needs. They can also explain how different policies handle excesses and help you compare plans for the best fit.
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