When is health insurance necessary?

Most people with private medical insurance (PMI) choose it so that they have quicker access to treatment with a choice of hospitals and consultants.

Everyone can benefit from private health insurance, and the younger you are, the cheaper it will be. Your family health history is a good guide to how likely you are to suffer from ill-health.

No one likes to think that they will get ill, but the statistics show there is a real likelihood of anyone suffering a major illness in their lifetime. One in three of us will contract cancer, and 280,000 each year suffer a heart attack.

Add to that the 10,000 people a year who are diagnosed with Parkinson’s disease and the 120,000 people that suffer a stroke and the odds don’t look that great.

This is why some form of health insurance is a good idea unless you’re happy that you have an adequate choice of good NHS hospitals and GP practices in your area.

How much will health insurance cost?

The cost of private health insurance depends on where you live, your age and health and the level of cover you require. You can choose your plan based on how much you can afford to spend and how much cover you need.

Roughly speaking, plans fall into three groups:

Budget – the most basic

Standard  - limited treatment with costs capped

Comprehensive – the highest level of cover

Alternatively, you may have access to health insurance through your company if it has a group plan.

Should I send my medical history to my insurer?

In most cases you will have to tell your insurer your full medical history. You will also be asked to give details of your GP, who the insurer will then be able to contact for further information.

The best thing to do is get a copy of your medical file from your doctor - there may be a small charge - to make sure you don’t miss anything out. When filling out any forms from your insurer, it's essential to be as detailed and accurate as possible. If you're not, when you make a claim, it could be turned down because of non-disclosure.

If you are medically underwritten, you disclose all previous treatments and conditions and the insurer will decide what to cover you for - usually excluding pre-existing conditions. Those who have had serious illnesses in the past can ask one of our specialist advisers to check the market.

Alternatively, you can go for moratorium underwriting. In this case you will be asked few medical questions but there is a blanket exclusion on any medical condition you have suffered from in recent years. The ban lasts typically for the last five years but can be shorter.

How do I choose a private medical plan?

There's a lot of competition in the market, and no two plans are the same. If you do want to buy private health insurance, it's important to sit down and decide which areas of cover are important to you:

• Are you covering just yourself or family members as well?
• Do you want initial consultations and diagnostic tests covered by a plan? All health insurance policies cover in-patient treatment.
• Are alternative treatments such as reflexology important?
• How much are you prepared to pay towards each treatment? The more you are willing to meet, the cheaper the premium will be.
• Do you want to be rewarded for keeping fit and looking after yourself?

If you're unsure about any of this and would like advice, you can use our form to contact a specialist independent financial adviser for recommendations.

What are the exclusions?

As with all insurance, there will be small print that's important to understand before you buy.

The biggest exclusion in medical insurance is chronic illness - where treatment is ongoing and designed to manage rather than cure the condition.

To make medical insurance affordable, it only covers acute conditions - those that can be cured with treatment. This has caused controversy in recent years as several types of cancer can be controlled by the latest drugs but the treatment continues for more than a year. Some policies will cease to pay for treatment once it goes into the second year. Also many policies will stop paying the cost of treatment when it becomes palliative for terminally ill patients.  

There are, of course, other exclusions in the small print. Some of the common ones include:

• Drug abuse
• Self-inflicted injuries
• Out-patient drugs and dressings
• HIV/AIDS
• Infertility
• Normal pregnancy
• Cosmetic surgery
• Kidney dialysis
• Organ transplant
• Injuries arising from dangerous hobbies (often called ‘hazardous pursuits’).

How does making a claim on health insurance work?

In most cases, you need to visit your GP first for the doctor to make the initial diagnosis and recommendation. If you need a private consultation, contact your insurer to make sure the treatment is covered under your plan and whether there are any financial limits on the type of treatment - such as out-patient consultations.

Insurers have a list of authorised consultants, so you will know in advance whether the full cost of the treatment will be met.

Insurers will normally settle the bills directly with the hospital, as opposed to you making payments and claiming the money back from them. The exception may be some alternative therapists who are paid directly by you at the time of treatment.

You must keep your insurer informed about the progress of your treatment and get pre-authorisation for any new tests, procedures or consultations needed.

There are all sorts of different types of health insurance. How do they differ?

Private medical insurance

Private medical insurance will provide funds for your consultations, tests and operations. You will have the benefits of a private room or private hospital and no waiting lists. What's more, you should be able to choose where you would like to be treated and when.

PMI plans are taken out as a yearly contract and premiums will rise each year with medical inflation and age.

Critical illness

Critical illness insurance covers patients who are diagnosed with a serious condition such as cancer or heart attack. It pays out a tax-free lump sum of money that can then be used by the patient as they wish.

Income protection

Income protection insurance will pay you a regular monthly income should you become incapacitated and unable to work. It can also cover you if you are made redundant – provided it's not as a result of misconduct.

Cash plans

These are a low-cost alternative to private health insurance. They provide a cash lump sum which can be used to put towards the cost of private treatment.