Understanding health insurance: A comprehensive guide

What is health insurance? How do I choose a policy? How much does it cost? Find out more in this guide.

What is health insurance and how does it work?

Health insurance, also known as private medical insurance (PMI), is a policy designed to cover some or all of the costs of private medical treatment. Should you or a loved one get ill you have peace of mind that they will have access to the very best treatment at a time and place that is convenient to you. In this comprehensive guide, we will explore the basics of health insurance, including how to select the right policy and understand its coverage and costs. Additionally, we'll explore the difference between health insurance and cash plans, empowering you to make well-informed decisions regarding your healthcare needs.

Types of health insurance policies

Employer-provided health insurance

Employer-provided health insurance is a valuable benefit offered by many companies in the UK. Employers usually provide this as part of a benefits package, to ensure that their staff have access to quality medical treatment when needed and to demonstrate a commitment to their wellbeing, helping to attract and retain top talent.

Individual or family health insurance

If you are self-employed or not covered by an employer, individual or family health insurance policies are available. The individual or family pay the premiums directly to the insurer for their chosen cover options. Most policies allow you to choose from a range of options to suit specific needs and budgets.

What does health insurance cover?

Most health insurance policies offer a range of benefits and cover options to ensure customers can find the right policy to meet their needs and budget.
A typical health insurance policy includes cover for the following:

In-patient and Day-patient Treatment

One of the fundamental aspects of health insurance is coverage for in-patient and day-patient treatment in hospital. It is important to understand the extent of cover provided by the health insurer for various medical procedures, surgeries, and stays in private hospitals.

Diagnostic Tests

Diagnostic tests are essential in identifying and monitoring medical conditions. Cover for diagnostic tests typically include MRI, CT, and PET scans, helping to a reach a timely and accurate diagnosis.

Out-patient Treatment and Cancer Care

Out-patient treatment, including consultations and investigations, plays a crucial role in healthcare. It can be either included as a standard benefit or provided as an optional extra. Likewise, cancer care, comprising consultations, treatments, and therapies, may either be covered within the policy or made available as an add-on.


Therapy can be provided on an in-patient or day-patient basis. Therapy treatment typically includes physiotherapy, chiropody, homeopathy and acupuncture and might be offered as standard on the policy or as an optional extra with a choice of benefit limits.

Health & Wellbeing Support Services

Many health insurance policies in the UK offer additional support services to enhance overall wellbeing. These support services typically provide mental health benefits, counselling, and access to wellness programs to support your holistic health.

Need help with some of the words and phrases commonly used in health insurance?

What does health insurance not cover?

While health insurance can provide extensive cover, there are certain treatments and conditions that are usually not covered. It is important to understand that health insurance is not designed to be a replacement for the NHS, but rather to complement it. The terms and conditions of the health insurance policy will detail what is not covered and these typically include the following:

  • Pre-existing conditions.
  • Long-term chronic conditions.
  • Fertility problems, pregnancy and childbirth.
  • Cosmetic treatment.
  • Self-inflicted injuries.

It is important to read the full terms and conditions of any health insurance policy carefully to understand what is and what isn't covered.

Pre-existing conditions explained

We define a pre-existing condition as any physical or mental health condition, disease, illness or injury, whether symptomatic or not, that exists before the start of your policy or scheme. This includes anything for which you have received medication, advice or treatment; or where you have experienced symptoms, even if the condition has not been diagnosed.

How do I choose a health insurance policy?

It is important to understand the cover a policy provides. Many health insurance products have a range of underwriting options and different levels of cover, designed to meet different customers' needs. This will determine if personal exclusions are added or if any benefits limits will apply. Key things to consider when comparing policies might include:

1. Freedom to choose

Are you limited to certain hospitals and healthcare providers by the insurer? Can you choose who and where you are treated? Consider the flexibility of choosing preferred hospitals and healthcare providers without limitations imposed by the insurer.

2. Out-patient treatment

Does the policy include cover for out-patient treatment and investigations, or if it offers optional add-ons for these services. Understand the associated costs and benefits of including out-patient cover on your policy.

3. Benefits and cover limits

Review the benefits and cover limits offered by different health insurance policies. Assess if they align with your specific healthcare needs, including the maximum coverage amount for various treatments and services.

4. Underwriting and exclusions

Understand the underwriting options that are available on a health insurance policy and any potential exclusions that may be applied. Common exclusions may include pre-existing conditions, long-term chronic conditions, fertility treatments, pregnancy, childbirth, cosmetic procedures, and self-inflicted injuries.

5. Cost

Consider your budget and determine the amount you are willing to spend on your health insurance premium. Compare policies based on their costs and the value they provide in terms of coverage, benefits and service provided.

How much does health insurance cost?

Premiums for individuals and families are typically calculated based upon:

  • The ages of the people on cover.
  • What part of the country they live in.
  • If anyone on cover smokes or vapes.
  • The policy level of cover chosen.
  • Any benefit limit options or optional benefits chosen.
  • Any Excess or Shared Responsibility options selected.
  • The method of underwriting chosen.

Health insurance premiums will vary based on the needs and the lifestyle of those looking for cover. Premiums will rise over time and can be impacted by claims made.

Company health insurance premiums will be affected by some of the above, but also by company size and other factors.

What is the difference between health insurance and a cash plan?

Unlike health insurance, which covers treatment of unforeseen medical conditions, cash plans contribute towards the cost of routine healthcare. So you don't have to be ill to benefit. It's an affordable way to recover the costs of essential, foreseeable healthcare.

Routine healthcare costs include:

  • Dental check-ups and treatment.
  • Sight tests, prescription glasses and contact lenses.
  • Physiotherapy, chiropractic treatment and osteopathy.
  • Money back on specialist consultations.

Eligible treatment costs are reimbursed straight back to you.

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