This article was last updated by the author in October 2016.
A brief introduction to health insurance.
There are a number of different types of insurance related to
the health of individuals. Two of the most commonly purchased
- Personal accident. This pays the benefit stated in the policy
if the insured suffers an accident. It can be extended to provide
cover if the insured is off work due to sickness
- Private medical expenses insurance (also known as health care
insurance). This provides cover for those who seek private medical
treatment outside the NHS when they are ill. It offers greater
choice over where and when the treatment will be carried out, and
Cover is usually arranged on an annual basis. It is available as
a stand-alone policy, but is often purchased as an add-on to
another policy, such as travel, motor and household. Sickness cover
is usually only available as an add-on to personal accident
insurance, as insurers view it as presenting a greater degree of
Cover is provided in the event of accidental death or
bodily injury for:
- capital sums: one off lump sum payments in the event of death
or certain specified injuries
- weekly benefits: payable for a maximum of 104 weeks, if
the insured is temporarily disabled due to an accident.
The capital benefits are:
- Death: this must occur within 12 months of the accident
for the benefit to be payable
- Total loss of sight in one or both eyes
- Total loss of one or both limbs: this must occur within 12
months (sometimes 24 months) of the accident
- Permanent total disablement: this is not payable until at least
12 or 24 months after the accident, as it may take this length of
time to determine whether the disablement is both permanent and
- Permanent partial disablement: a lump sum is payable on a
sliding scale depending upon the part of the body affected.
The weekly benefits are:
- Temporary total disablement: paid when the insured is unable to
carry out his/her usual occupation
- Temporary partial disablement: paid when the insured is unable
to carry out a substantial part of his/her usual occupation.
Limits apply to each of these benefits. Cover is often bought in
'units'; for example, 1 unit of cover may equal a capital sum of
£10,000. The proposer can buy as many units as they like provided
they are able to pay the premium. However, insurers try to ensure
that any weekly benefits are not greater than the insured's normal
earnings, as it may encourage fraudulent claims.
Sickness cover only provides weekly benefits. Cover is subject
to a 7 day franchise and excludes sickness contracted within the
first 21 days of the commencement of the policy period.
Cover usually only applies within the following geographical
- Personal accident - worldwide
- Sickness - UK, Europe, USA, Canada, Australia and New Zealand.
Sickness cover may be extended beyond these normal limits, subject
to an additional premium.
The typical age limits which apply when taking cover out
- Personal accident: 16 - 70 years
- Sickness: 16 - 60 years.
Cover can be arranged individually, but is often arranged on a
group basis by an employer as an employment benefit, or for members
of a club or other affinity group.
Cover for individuals, can also be extended to include a spouse
and eligible dependants (usually up to the age of 18 or 21 years)
under the same policy.
A range of benefits are available, including the costs of:
- Hospital charges, including accommodation, theatre fees and the
cost of surgical dressings and drugs
- Specialist's fees for both consultations and treatment,
including surgeons' and anaesthetists' fees
- Other costs, such as ambulance fees and home nursing fees
- Dental and optical treatment fees
- Complementary therapies
- A cash benefit while treatment is being received free of charge
under the NHS.
Not all of these benefits are provided by every policy. Cover is
provided for both in patient and day care treatment. There is
usually a limit to the amount payable in any one year.
The main optional extension to a personal accident and sickness
policy is legal expenses cover. This provides cover to pursue legal
action against a negligent third party responsible for the accident
which caused the death or injury.
Variations to the cover are available through a range of
policies, offering differing levels of cover and choice of
treatment. Low cost policies provide more limited benefits, with
restrictions on the level of hospital accommodation which can be
chosen. They may also require the insured to use the NHS if
treatment is available within a specified period of time; for
example, within 6 weeks of diagnosis. The most expensive policies
provide wide ranging cover with complete choice over where and when
treatment is available. An insurer may also add on benefits
such as travel insurance, discounted gym and fitness club
membership, overseas cover, wellness benefits, health screenings,
information and help systems, complementary and alternative
therapies, and critical illness cover.
Typical exclusions to a personal accident and sickness policy
- the insured being under the influence of, or being affected by,
alcohol or drugs, unless under medical supervision
- engaging in aviation, other than air travel as a passenger
- self-inflicted injury or disease
- physical defects or infirmity which existed prior to an
- hazardous pursuits
- childbirth, pregnancy, venereal disease or AIDS
- war risks.
Typically, a private medical expenses policy will not provide
- long term chronic conditions
- medical conditions for which the individual has received
treatment within five years of taking the policy out
- long term residential care
- normal pregnancy and maternity
- routine dental treatment
- homeopathic treatment
- cosmetic treatment
- routine sight testing
- treatment which has not been recommended by the patient's GP,
except in an emergency.
Some of these exclusions, such as pregnancy, may not apply to
the most comprehensive policies.
The main rating factors are:
- Personal accident insurance and sickness insurance. In
assessing the risk, the underwriter needs to understand the
physical condition of the person and their lifestyle. The main
rating factor for is the occupation of the proposer. It is usual
for insurers to group occupations into four main classes, applying
premiums according to the level of accident/health risk involved.
Other factors which are taken into account include age,
weight/height, leisure activities, extent of air travel and
accident history. Generally an additional premium is charged for
sickness cover, calculated as a percentage of the personal accident
- Private medical expenses. For individual policies age is a key
rating factor, with premiums tending to rise as age increases. The
premium will also vary depending on the level and scope of cover
selected. For group policies premiums tend to be based on the
overall claims experience.
Cover for personal accident insurance is provided by some
composite general insurers, in addition to a number of specialist
insurers, who have developed an expertise in this particular type
of product. Cover is available directly from insurers, as well as
through insurance intermediaries. Some free cover is often offered
by credit card companies and in connection with 'paid for' bank
Private medical insurance is predominantly underwritten by
specialist insurers. It can be purchased from insurers directly
over the telephone or internet, as well as through