Health insurance and personal finance

Health insurance and personal finance
November 21, 2016 Cheryl Lewis
Learn about health insurance for your financial planning and personal finance

Health insurance is a type of insurance coverage that covers the cost of an individual’s medical expenses.

It is generally more common in other countries, especially those without a National Health Service.

It the UK it is an optional purchase, one you could spend a lot of amount of money on.

Planning for future events will always need a certain amount of guesswork. Some things can be predicted, but many others cannot. Insurance companies enjoy this uncertainty.

When something might happen, insuring against it will provide you with some peace of mind. Insurance can reduce the negative impact. It can help you to cope financially when there are costs involved.

Some types of insurance are compulsory if you want to carry out a certain activity. Some lenders need you to have life insurance before they will give you a mortgage. You cannot drive without insuring your vehicle.

Picking and choosing your insurance cover can be complicated. Health insurance is one option, but is it worth your money?

Should you get health insurance?

Health insurance is often also known as private medical insurance.

It covers the cost of some medical procedures including diagnostics, care, treatments and operations.

Evaluating the NHS

People in the UK are fortunate to have access to the National Health Service, or NHS.

The NHS provides medical care that is intended to be ‘free at the point of delivery’. Though this is not always the case, having access to the NHS means that UK residents should not get into debt for their healthcare.

Increasingly, there are concerns about the longevity of the NHS. The healthcare budget is stretched. Often, there are long waiting lists or sub-par facilities for NHS patients.

Private healthcare provides more choice. Facilities may be better and waiting lists may be shorter. You might even get to choose which professionals will be involved in your care.

When health insurance is worthwhile

Health insurance may be worthwhile, if you want more control over your medical care, or feel unhappy with NHS standards.

It can be valuable for people that need specialist treatments and medications. However, health insurance usually won’t cover any pre-existing conditions.

If you spend a lot of time doing a risky sport or activity, then you may want to plan ahead by purchasing health insurance. Check your policy carefully. Some don’t cover high-risk activities.

Is health insurance worthwhile?

Each policy is different. Each provider is different, too. If you want health insurance, it is important to know what coverage you can expect.

Health insurance is a speculative cost. You pay a monthly or annual premium, based on the possibility that you could be ill or injured in future.

Once you have health insurance, it is available to use within the limitations of your policy.

You will always retain your right to choose NHS services.

If something isn’t covered by your health insurance, you can fall back on the National Health Service.

Affordability of health insurance

Health insurance will pay for some, or all, of the costs of private healthcare.

Thanks to the NHS, it is not essential in the UK.

If funds are limited, there are many other types of insurance that should be a higher priority. These include life insurance and home insurance, which have no state-provided alternative.

Health insurance is a luxury. It is something to consider if you have the money spare, but not at the expense of other financial commitments.

As an alternative, you can choose to put spare money into savings. Then, you can pay any private medical costs outright.

Insurance covers you immediately. Whilst using your savings can be cheaper, there is a risk that you will need medical services before you have saved to pay for them.

Costs of health insurance

The average UK health insurance premium is £1,120 per year.

Minimal health cover can be significantly cheaper. The more you want to cover, the more you will pay for your insurance.

Insurance prices can also be affected by your age, current health, and location, as well as several other factors.

As part of your financial planning, consider that the price of maintaining your health insurance will rise as the years go by. The older you are, the more you’ll be expected to pay.

Older people are more likely to make claims. As a result, they have higher premiums.

A young person in good health can expect to pay as little as £25 per month or £300 per year.

Furthermore, there are people on the other end of the scale. Including the elderly, obese, smokers, and those with existing conditions can pay more than average.

A healthy 70 year old will usually receive quotes more than £2,000.

Health insurance options

It is important to shop around for health insurance quotes.

Consider the level of cover that you need, as well as the price you’ll be paying.

Insurance policy coverage

Usually, insurers offer cover in packages.

Some have a core package. They will let you adapt the cover by adding the features that you think you’ll benefit from.

Cheaper packages won’t cover as many things as their more expensive counterparts. They may also offer a smaller amount of cover for the things that are included.

For example, a core package might include £350 of physiotherapy cover, amongst other benefits. A more expensive package may raise this to £500 of cover.

Core packages might not include cancer cover, maternity benefits or dental treatment. Yet, higher level packages might.

As well as looking at what a policy covers, take some time to check what it doesn’t.

Pregnancy, cancer, HIV/AIDS, transplants, dialysis, war injuries and drug/drink damage are common policy exclusions.

FMU or Moratorium

When looking for health insurance, you may come across the terms ‘FMU’ and ‘Moratorium’. The latter is usually slightly more expensive than the former, though they look the same on paper.

FMU stands for Full Medical Underwriting. For this, you’ll be required to complete a health questionnaire. The insurer reviews this, then decides if they need to add exclusions to your policy.

The benefit of an FMU policy is that you will know, ahead of time, exactly what is being excluded.

The alternative is Moratorium. With this, your medical history is not taken into account. A Moratorium policy is quicker and easier to set up.

Understanding health insurance

If you later attempt a claim, it may be refused for a pre-existing condition or something that you have sought advice about.

Insurers tend to look back over five years of medical history when considering your health insurance claim.

If you had symptoms of a condition a few years ago, and want to reduce the risk of a rejected claim, then you should choose Full Medical Underwriting. This offers more certainty and is often cheaper, but can be time-consuming and may feel more invasive.

A Moratorium policy can be quickly created. You will not need to provide in-depth information about your medical history. Yet, you may have a claim refused if you are later found to have had pre-existing symptoms.

Finding the right health insurance policy

You may have a specific insurer in mind. Apply for quotes direct, to see what the insurer can offer.

Some offer their best prices to direct applicants.

You may also want to use a quote comparison website. This will help you to find the best deal, but should not be considered a like-for-like comparison. Always take the time to check exactly what’s included in any health insurance policy.

You cannot simply choose the cheapest quote. They will all have their own requirements and restrictions.

If you do use a comparison website, you should read all policy documents before you make a final commitment.

A broker can help you to find the best health insurance. Most people will not need to contact a broker, but you may benefit if you have a complicated medical history.

Brokers have a knowledge of the market that will help you to find the best cover, taking into account any pre-existing conditions.

Some insurers provide benefits such as gym membership discounts. These can be useful, but don’t let them sway your decision.

The policy itself is far more important than any special offers that might be used to tempt you.

Renewing your health insurance

Most health insurance prices will rise by the year. Age is a significant factor.

When your policy is due to renew, it can help to shop around. You may also want to get new quotes from your existing insurer.

Some insurers offer discounts if you are maintaining a healthy lifestyle, or improving your health.

If you were overweight but have been losing, or if you were a smoker but have quit, then you may be offered cheaper health insurance.

Many factors are taken into consideration when you apply for a health insurance quote.

Make sure that you understand exactly what a policy entails so that you’ve covered for everything you want.

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