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Should You Pay for Private Health Insurance?

Updated: Sep 20, 2023

Should You See the Cost of Private Health Insurance As an Abject Waste of Your Hard-Earned Money or As an Invaluable Way of Providing Peace of Mind to You and Your Family?


Private medical insurance is designed to pay some or all your medical bills if you're treated privately, giving you a choice in the level of care you get, as well as how and when it's provided.

It’s not cheap. According to research by Nimblefins the insurance analysts, the average cost of an individual private health insurance plan is £85 per month, or £1,020 per annum. Depending on your age and level of cover it can, of course, cost a lot more.

The big challenge you face when deciding whether to pay for this type of insurance is that you don’t actually want to claim on it because you don’t want to get ill or suffer an injury. Therefore, it all comes down to your peace of mind, which by its nature is intangible.

It’s just one of many financial trade-offs that we all have to make because if you spend your money on medical insurance, it’s money that you can’t spend on holidays or eating out or investing into your ISA, say.


IT DEPENDS ON WHAT YOU VALUE


We’re all different as human beings and we know that just as some people take great comfort in knowing that insurance is in place, others shudder at the thought of paying hundreds or even thousands of pounds a year across to an insurer and would view it as an abject waste of their money.

Ultimately, you need to ask yourself how much more relaxed you and your family would feel if you paid for this insurance and then go with what your gut tells you.

Naturally, it also depends on your experience of the NHS in your area and how comfortable you are that you’ll get the treatment you need in a timely fashion if something serious did manifest itself.

It’s a competitive market, so although premiums might feel high, they should be seen as “fair” considering the risk an insurer is taking on.


A WAY OF KEEPING YOUR COSTS DOWN


One strategy we’ve seen quite a few people adopt is to go with a large excess to keep their premiums down to a level they feel comfortable with and treat the insurance as something they will only use if something major cropped up, using a self-funding approach for anything under the excess.

Also, as these policies often come in a gold, silver or bronze type of structure, another strategy is to anchor yourself around a certain level of annual premium that you are comfortable committing to, both financially and emotionally, and then structuring the amount of cover you take out around this.


TANGIBLE COSTS, INTANGIBLE BENEFITS

In our experience, many people in good health intrinsically prefer the idea of self-funding insurance over paying regular premiums.

That's because the cost of the premium is very tangible whereas the benefit is intangible.

It is human nature for people to think that they're less likely to have a health problem than they statistically are (“it'll never happen to me”). Until they have an incident. The incident makes the benefit very tangible, people then perceive much higher value in the cover and therefore many people switch to paying for health insurance if they can.

As with all insurance, it might only feel like good value if you make a claim, but the best outcome is that the premium ends up being wasted!

You can read more about the subject in this piece in the Financial Times “How to pay for private healthcare” that we were pleased to be asked for our input on.

If you would like any help thinking through whether private medical insurance is right for you, please give us a call on 020 3488 9505.



The value of your investments can go down as well as up, so you could get back less

than you invested.

Tax and Estate planning is not regulated by the Financial Conduct Authority.


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