Private Medical Insurance – why would you consider having it?
We’re lucky, we live in a country with a wonderful national health service. So why is private medical insurance worth considering?
Who it’s for
The key word there is consideration. Going back to The Money Plan principles, Step 3 is about securing your financial foundations, five of which are optional; private medical insurance is one of those five.
You shouldn’t even consider private medical insurance (PMI) until all your unsecured debt has been repaid. It’s for people who have their basics covered and have a little surplus money, and it can be important depending on your circumstances.
If you run your own business for example, getting medical treatment swiftly and being able to get back to work is really important.
But don’t be mistaken in thinking it’s just for the wealthy – I have some financial planning clients who are very wealthy who say that the NHS has always served them well and that’s all they need. And on the flipside, there are others who say that PMI isn’t a luxury but a necessity for them, that if they need to have treatment then they have to be able to access it as quickly as possible.
There are no rules to it: assess your personal circumstances and decide if it’s right for you. And keep in mind, you don’t have to have insurance to have private treatment, some people do pay for it as the need arises.
How private medical insurance works
There are two ways into a hospital: via a GP or via A&E. For the first, after seeing a doctor you might be referred to either the NHS or a private consultant. It’s at that stage that you ask to be referred to a private consultant if you have medical insurance, and generally speaking the waiting time goes from weeks to days if you have a private policy.
That’s a generalisation of course, it varies widely and urgent treatments are very quick on the NHS, but with a private policy you’ll often see the same or a similarly-qualified consultant (most work for both sectors) within a matter of days.
Going into hospital via A&E, you’ll usually get stabilised and then transferred to either an NHS ward/room, or a private ward/room. It’s at the stage when you’re stable that you or your family would tell the hospital you have PMI.
The finances of PMI
With just about all insurances, there’s an excess to pay: when you make a claim, you pay the first amount of money, like with your car insurance or home insurance.
My advice if you take out PMI is to make your excess as high as you’re financially comfortable with. If you’re following The Money Plan then you should already have your emergency cash in place, which should help with this.
That’s because, just like with other insurances, having an excess of at least £250 brings your monthly premiums down – and you should be aiming to make those premiums as low as possible.
Once you’ve got a policy, claim on it for essential purposes only, not on a whim. As an annual policy, you’ll find that most years your premiums will go up due to your age increasing. PMI has age banding, generally within five- or seven-year bands, so your premiums will rise as you reach the next level.
Your premiums are also determined by your claims history, as well as on the cost of providing treatment to the population as a whole, so this is an insurance that’s going to go up every year. If you start claiming for minor treatments, those rises will accelerate.
Choosing a policy
I’m not aware of an online search facility that compares all the different providers of PMI. My advice is to go and see a broker or financial adviser who knows the market and can compare policies that suit your needs and personal history.
There are big, well-known names like BUPA and Vitality, which tend to be better because the range of what they cover is wider, but do look around to see what best suits you.
Just remember, PMI isn’t just for the wealthy – it’s a choice, but it can be an important consideration particularly for the self-employed. For some people it’s very reassuring to know that they can get a consult or treatment rapidly, so think about your circumstances and act accordingly.