Recent trends such as growing demands on the National Health Service increasing waiting lists, severe shortages of dentists in the UK and expensive new drugs and treatments causing private medical bills to escalate have made decent health insurance seem like a prudent investment. But with so many types on the market, and so many different providers, purchasing a policy can often be a rather confusing venture. Each type of policy functions in a different way and covers different conditions and treatments; furthermore, depending on the policy type and the level of cover provided, costs can vary considerably.
So before you start shopping around for health insurance it is good idea to get an understanding of the policies that are available. This guide focuses on five common types of health insurance policy, examining what they cover and how they work. Hopefully it will give you the information you need to decide whether a particular policy is right for you and how to get good value for your money.
Private medial insurance
Private Medical Insurance (PMI) policies cover the cost of private treatment for curable, non-threatening medical conditions. This type of policy does not constitute an alternative to the National Health Service since, for example, they do not cover chronic health conditions or emergency medical treatment. Rather, a policy of this type, essentially, allows you to avoid the lengthy NHS waiting lists by having non-threatening conditions dealt with privately. The main advantage is that the policy holder can choose when, where and by whom they are treated so that you can receive treatment at a time and place that is most convenient for you.
Most insurance providers offer PMI policies with different levels of cover. Obviously, the more comprehensive the policy, the higher the premium will be. A standard policy will usually cover the cost of any consultations, tests, accommodation, treatment and nursing in a private hospital or on a private ward within an NHS hospital. Private facilities are more comfortable than those of the NHS, usually offering private rooms and superior food. Some policies allow you to claim money for any treatment that you receive from the NHS, emergency or otherwise, as well as a whole range of other extras and benefits.
PMI premiums rise faster than inflation, therefore keeping the cost down is important. Premiums are calculated by age and level of cover, so you should always compare a policy by its cover features and decide whether such benefits are essential requirements for you. If you are willing to increase your excesses you can get discounted premiums and you may be able to avoid further expense by opting for other limiting factors on your policy (such as having the choice of fewer hospitals in which you can receive treatment). Furthermore, some companies offer policies with no claims discounts and other money saving features.
With a great deal of media attention currently aimed at crises within the NHS, a PMI policy may seem like a wise purchase. However, they can be very expensive and should not be regarded as an essential. Despite controversy over 'postcode lottery' waiting lists and scares concerning 'super-bugs' the National Health Service provides an inclusive service for people who need medical treatment regardless of their ability to pay. So consider all the options before deciding on a PMI policy.
Critical illness cover
Current data indicates that around 25% of us will suffer from some form of serious illness before we reach retirement age. Though nowadays, due to medical advances, many of these conditions may not prove to be life-threatening, the chance of incapacitation, disability and/or an extended period of recovery could mean that it may take some time before you can return to your usual working practices, if at all.
To ease the financial difficulties of such circumstances Critical Illness (CI) Insurance, also known as Dread Disease Cover, is designed to pay out a tax-free lump sum if you are diagnosed with a range of specific medical conditions during the term of the policy. The conditions covered differ with each policy but they usually include common serious health problems such as kidney failure, strokes, heart attacks and various types of cancer; policy holders can also receive a payout if they are left disabled as a result of illness or accidental injury. The majority of policies, however, exclude conditions such as HIV/AIDS or those caused by alcohol/drug abuse and self-inflicted injuries.
Most insurance providers will offer Critical Illness cover to anyone between the ages of 17-70 years old. You can buy policies for any duration, although you will usually have to wait about three months before making a claim. Before obtaining a quote you will also need to decide on the assured sum - the amount paid out in the event of a claim - which should be large enough to cover any mortgage or loan repayments as well as a substantial amount to cover things such as medical expenses and the potential financial needs arising from disability etc.
The cost of a policy is generally based on gender, age, length of policy and the assured sum amount. Some insurance companies will also take into account your state of health and your family's medical history when calculating your premium quote. Some policies have fixed a premium for the duration of the policy (sometimes called a guaranteed premium), which may be more expensive but could save you money in the long run since CCI premiums tend to rise faster than the rate of inflation.
Healthcare cashplans
Healthcare Cash Plans are a cheap and practical way to cut the costs of your medical expenses. For a small monthly payment a cash plan allows you to claim a proportion of your expenses on a wide range of medical treatments and services whether you are treated through the NHS or privately.
A cash plan will usually cover dental and optical work, prescriptions, physiotherapy, specialist consultations and alternative therapies. Unlike many other healthcare policies, you can take out a cash plan without a medical examination and the cost is usually the same regardless of age. The only factor determining the price is the level of cover that a policy provides. In this regard, the more you pay for a policy, the more treatments you can claim for, the higher the proportion of medical costs covered and the higher the annual limits for each type of treatment. With most policies you will have to wait for about three months before you can make claim.
Since cash plans cover expensive medical treatments such as dental and optical work, are relatively cheap and often allow you to include your children on a policy for free they represent excellent value for money.
Payment protection insurance (PPI)
Payment Protection Insurance (PPI), sometimes called Accident, Sickness and Unemployment (ASU) insurance, is designed to replace your income and pay off debts in the event that you are unable to work. A policy claim will usually pay you a wage of around 65% of your gross salary if you are unable to work as a result of accidental injury, sickness or unemployment.
When you take out a loan, mortgage, credit card or some other credit agreement a PPI policy will often be offered to you by the lender; sometimes they are included automatically in the package. Be mindful of this, however over recent years there has been a great deal of controversy concerning PPIs since they are frequently over-priced and irresponsibly sold by companies who often target more vulnerable borrowers with hard-sell tactics. However, they are not compulsory, so you should check the small print as to whether a PPI policy is included in a quote before signing up to a credit agreement.
Despite this, Payment Protection Insurance can, in some cases, prove to be a prudent method of protecting yourself and your family financially. If, for instance you are self-employed, in a job with a medium/high risk of injury and have financial obligations such as mortgage or loan repayments it may well be a wise choice to opt for such a policy, since state incapacity benefit may not cover your needs sufficiently should you suffer a serious injury.
For a decent, good value policy though it is recommended that you find a reputable insurance provider offering PPI as a stand-alone product. These policies are usually much better value than those offered alongside credit agreements since they tend to have better terms and can be tailored to suit your individual situation. Premiums and payouts generally depend upon the policy holder's occupation/salary and how quickly you want cover to kick in.
Dental insurance
The mounting shortage of National Health Service dentists means that it is becoming increasingly difficult to get cheap dental treatment in the UK. As a result more of us are turning to private dental health practitioners for treatment, which can be very expensive.
Most Dental Insurance policies work in the same way as general healthcare cash plans, but instead of covering you for a wide range treatments and services they only provide cover for dental requirements. This type of policy will allow you to claim back a percentage of your costs for a range of dental work from your insurer whether you receive treatment privately or through the NHS.
As with other types of health insurance cover varies between policies and, generally, the more you pay the more comprehensive the policy's benefits. A standard dental insurance policy should cover a proportion of the cost for examinations, x-rays, bridge and crown work and emergency treatment. Children are usually covered by a policy at no extra cost - because they receive free NHS treatment anyway. On the whole, a good dental insurance plan is an excellent way to avoid expensive dental bills.
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Author: KYM Editor
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