What is Excess in Health Insurance?

Excess in Health Insurance: What You Need to Know

As a health insurance advisor, it is important to understand the concept of excess in health insurance policies. Excess is a term used to describe the amount of money that you will be required to pay out of your own pocket before yourinsurance coveragekicks in. In this article, we'll delve into the specifics of excess in health insurance policies and provide some guidance on how to choose the right policy for you.

What is Excess in Health Insurance?

Excess is a cost-sharing mechanism in health insurance policies that requires policyholders to pay a certain amount of money out of their own pocket before their insurance coverage begins. This amount is typically set at a fixed amount or a percentage of the total claim, and is known as the excess or deductible. The purpose of excess is to discourage policyholders from making small claims and to reduce the overall cost of insurance coverage.

Types of Excess

There are two types of excess in health insurance policies: voluntary and compulsory. Voluntary excess is the amount that a policyholder agrees to pay out of their own pocket in exchange for a lower premium. Compulsory excess, on the other hand, is a fixed amount that policyholders are required to pay before their insurance coverage begins. In some cases, insurers may offer a combination of both voluntary andcompulsory excess.

How Excess Affects Premiums

The amount of excess you choose will have a direct impact on the cost of your health insurance premiums. A higher excess will result in a lower premium, while a lower excess will result in a higher premium. It's important to strike a balance between the amount of excess you're willing to pay and the amount you're willing to pay in premiums.

Choosing the Right Excess

Choosing the right excess for your health insurance policy will depend on a number of factors, including your budget, your health needs and the level of risk you're willing to take on. If you're generally healthy and don't anticipate needing to make many claims, a higher excess may be a good option. If you have pre-existing conditions or anticipate needing regular medical care, a lower excess may be a better choice.

Insurance and Financial Planning

In addition to health insurance, it's important to consider other types of insurance coverage as part of your overall financial plan. This may include life insurance, disability insurance, and long-term care insurance. By choosing the right mix of insurance coverage, you can protect yourself and your family from financial hardship in the event of an unexpected illness or injury.

Insurance Case Study

Consider the case of John, a 35-year-old man with a family history of heart disease. John decides to take out a health insurance policy with a $1,000 compulsory excess and a $500voluntary excess. While John is generally healthy, he understands the importance of having insurance coverage in the event of a heart attack or other health emergency. By choosing a policy with a combination of compulsory and voluntary excess, John is able to strike a balance between his budget and his need for coverage.

In conclusion, excess is an important aspect of health insurance policies that can have a significant impact on the cost of premiums and the level of coverage you receive. By understanding the types of excess available and choosing the right amount for your needs, you can ensure that you're protected from unexpected health costs without breaking the bank.