Should you take out private health insurance?

We hear so often these days that the NHS is dreadful, that most of us are slowly becoming convinced, if we can afford it, that we should take out private medical insurance (PMI). But should we?

For starters, note that medical insurance doesn't cover the conditions most of us need treatment for. It doesn't cover childbirth (not even emergency Caesareans), it often doesn't cover depression and it also very often doesn't cover chronic or incurable illnesses such as diabetes, asthma or multiple sclerosis. It is also utterly useless in an emergency: private hospitals don't even have emergency rooms.

And anyway the NHS never makes you wait more than an hour or two to have a broken leg sorted out. The doctors you see privately will be the same ones you would have seen on the NHS anyway they're just bumping up their incomes by going private and NHS consultants are usually the ones at the cutting edge of healthcare.

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And it isn't cheap either. A 30-something man or woman would be lucky to get cover for less than £30 a week. At that price it would come with so many exemptions you'd have to be nearly dead before you could claim on it. You'd need to be spending more like £70 a month to be sure of getting anything remotely comprehensive. On the plus side, having good insurance does mean that you'll get treated fast; that you'll have some choice about who treats you and where; and, of course, that the hospitals you visit will be less dirty and less depressing than they might be otherwise.

Cut the cost of going private

So how can you cut the cost? First, double-check whether your employer offers PMI. As Moneysavingexpert.com points out, even if you have to pay for it you may find that thanks to your employer's "bulk-buying power" it will come cheap.

Failing that, one way to save is to buy your insurance from a company that will allow you to pay for your own treatment up to an agreed level (the excess usually anything up to £5,000) and then pay any costs beyond that itself. This can more than halve the cost of premiums. You can also agree to restrict the number of hospitals you can be seen in to keep your premiums down (ie, no top private hospitals or London teaching hospitals).

Stopping smoking will really slash the cost. A 34-year-old female smoker would pay £76.01 a month for PMI on PruHealth's comprehensive plan, says The Sunday Telegraph, but a non-smoker of the same age would pay £68.78 or nearly £90 a year less. Finally, you can opt for a policy that only pays for inpatient care. This leaves you at the mercy of the NHS for all your diagnostic tests and your referral to a consultant. But at least it means that if you do end up in a hospital it won't necessarily be an NHS one. To compare all these policies see Moneysupermarket.com.

If you really can't afford or don't want basic insurance for yourself it is also possible to insure just your children under a new policy from AXA PPP Healthcare. This provides, says the Sunday Express, "hospital cover in the event that the NHS cannot provide care within a reasonable time as well as access to private consultants and diagnositc services".

This doesn't sound expensive at £9.99 a month for the first child, and £7.99 for each extra; but it doesn't cover much, either. It pays out only if the NHS cannot see the child "within six weeks of the ideal treatment date". However rubbish the NHS might be in lots of other ways, this kind of delay doesn't seem likely if your child is considered seriously ill. It also doesn't cover ongoing outpatient care. So while it might give you a degree of peace of mind, it probably doesn't offer much value something it has in common with a great many other healthcare policies.

Start a Calamity Account instead

There is one more alternative: simply save all the cash you might have spent on insurance and then pay for any treatment you might need that you don't want to wait to have on the NHS.

This sounds frightening, but it shouldn't be. Let's not forget that you've already paid for the NHS via your taxes and that it really isn't that bad: it is generally accepted that in emergencies and in the care of people with serious or terminal illnesses the organisation does a good job of providing comprehensive medical care. Where the NHS more often falls down is on the treatment of acute but curable conditions; but if you are saving you should be able to pay for this yourself if you feel you need to.

Note that 80% of these treatments are dealt with on an outpatient basis (blood tests, consultations, X-rays, scans and the like). These aren't particularly expensive. What are pricey, on the other hand, are mainly procedures that you won't need until you are heading for your 50s and 60s (hip replacements, for example), by which time your Calamity Account should be looking pretty healthy if you have regularly put £50-£100 a month into it instead of paying for insurance. A private hip replacement comes in at about £7,000, cataract removal at about £2,000 and a coronary artery bypass graft between £2,000 and £15,000.

Only 4% of private healthcare claims are for sums over £5,000. You could even combine self-insuring with buying a very high excess policy: if you agree to pay the first £5,000 of treatment you can cut the cost of a policy to a few pounds a month. That way you can build up your savings while retaining a sense of security, should something really horrible happen.