Key Takeaways
Your health insurance excess is the amount you pay towards a claim before your insurer pays the rest of the eligible costs. Choosing the right health insurance excess in NZ is one of the simplest ways to manage your premium without giving up cover for major treatment. This guide explains how an excess works, how the level you pick changes your costs, and how to decide what suits your household.
- A higher excess usually means a lower premium, and a lower excess usually means a higher premium.
- Depending on the policy, the excess may apply per claim, per condition, or per person per policy year.
- Choose an excess you could comfortably pay from savings at short notice.
- A higher excess suits people who mainly want protection from large bills such as surgery.
- Raising your excess is usually simpler than lowering the excess later, which may involve new health questions.
- If your premium is becoming hard to manage, review your excess before you consider cancelling.
What a health insurance excess is
An excess is your share of a claim. When you claim, you pay the excess amount and the insurer pays the remaining eligible costs, up to the limits in your policy. Sorted describes the excess simply as the part of a claim you pay before your insurance kicks in.
New Zealand health insurers usually offer a range of excess options, from nil up to several thousand dollars. The choices available, and how each one is applied, differ between insurers and between policies from the same insurer.
Excess, premium and co-payment
These three terms are easy to mix up:
- Premium: what you pay regularly to keep your cover in place.
- Excess: a fixed amount you pay towards a claim before the insurer contributes.
- Co-payment: on some policies, a share of each eligible cost that you pay in addition to, or instead of, an excess.
Your policy documents set out which of these apply to you. If your policy has both an excess and a co-payment, factor both into what you could pay out of pocket.
Per claim, per condition or per year
How often you pay the excess matters as much as the amount. Common approaches include:
- Per claim: you pay the excess each time you make a claim.
- Per condition or treatment episode: you pay once for a related course of treatment, even if there are several invoices.
- Per person per policy year: you pay the excess once in a policy year, and further eligible claims that year are paid in full up to the limits.
Some policies also waive the excess for certain benefits. Check the policy wording or ask your adviser exactly how your excess is applied.
How your excess affects your premium
The excess shifts some of the cost of smaller claims from the insurer to you. Because the insurer expects to pay less, the premium is lower. The higher the excess, the bigger that effect tends to be.
A simple example
Imagine two people with the same policy, one with a nil excess and one with a $1,000 excess. If both have surgery with eligible costs well above that amount, the person with the higher excess pays the first $1,000 and the insurer pays the remaining eligible costs. On a small specialist claim of a few hundred dollars, however, the person with the higher excess would likely pay the full amount themselves.
The question is whether the premium you save each year is worth the extra amount you might pay if you claim. For many people, especially those who mainly want cover for large hospital costs, the trade-off is worth making.
Get quotes at several levels
The premium saving from each step up in excess varies between insurers and changes with your age. Rather than guessing, ask for quotes at two or three excess levels and compare the yearly saving against the extra amount you would pay on a claim.
Choosing your excess level
There is no single right answer. The level that suits you depends on your savings, your health, how often you expect to claim and what you want your cover to do.
| Excess level | Premium | Out of pocket when you claim | Often suits people who |
|---|---|---|---|
| Nil or low | Higher | Little or nothing | Want the insurer to pay as much as possible on every claim, including smaller ones |
| Moderate | Middle | A manageable amount per claim or per year | Want a balance between premium and out-of-pocket costs |
| Higher | Lower | A larger amount, often meaning you pay for smaller treatment yourself | Mainly want cover for large costs and have savings to cover smaller bills |
Questions to ask yourself
- Could I pay the excess from savings if I needed surgery next month?
- Do I mainly want protection from large bills, or help with smaller costs too?
- How often am I, or my family, likely to claim?
- Does the excess apply per claim or per year, and how many claims might I make in a year?
- Is the yearly premium saving meaningful compared with the higher excess?
Match the excess to your emergency fund
A higher excess only works if you can pay the amount when you need treatment. If paying the excess would mean going into debt or delaying treatment, the excess is probably set too high for your situation. A common approach is to pick an excess no higher than the amount you keep in your emergency savings.
Using your excess to keep cover affordable
Health insurance premiums generally rise as you get older, and many people reach a point where the cost starts to bite. Raising your excess can bring the premium down while keeping cover for major treatment, which is often a better outcome than cancelling your policy altogether.
Why cancelling is risky
If you cancel and reapply later, anything that has come up in the meantime is likely to be treated as a pre-existing condition and excluded. Keeping your cover in place with a higher excess protects that continuity. Our guide to health insurance and pre-existing conditions in NZ explains why continuous cover matters.
Changing your excess later
Many insurers let you change your excess, often at your policy anniversary. Raising the excess is usually straightforward. Lowering the excess increases what the insurer may pay, so the insurer may ask new health questions and could exclude conditions that have arisen since your policy started. Check the process before you commit to a higher level.
Other ways to manage your premium
The excess is one lever among several. Before you cancel cover, consider:
- Removing day-to-day extras, such as GP visits, dental or optical, that you could pay for yourself.
- Reviewing optional benefits for specialists and tests outside hospital, and whether you need every option you hold.
- Asking whether the insurer offers a discount for paying annually or by direct debit.
- Checking whether your employer offers a workplace scheme you could join.
- Comparing your current policy with others, while keeping in mind the risk of losing cover for existing conditions.
Each change has a different effect on your protection. Removing a benefit you rarely use may cost you little, while dropping core surgical cover could leave you exposed to the costs you most wanted to avoid.
Excess on family and workplace cover
Family policies
On a family policy, the excess often applies separately to each person insured. A household with children who visit specialists often may find a lower excess more practical, while a couple who rarely claim may prefer a higher one. Look at your family's likely claims pattern, not just one person's.
Workplace group schemes
If you are covered through work, the excess is usually set by the scheme design, and you may have options to add to your cover or change your level of excess at your own cost. Our article on group health insurance for small businesses in NZ explains how schemes are put together.
Remember the public system
Health insurance sits alongside the public health system run by Health New Zealand | Te Whatu Ora, and ACC covers treatment for accidents. Private cover mainly helps you get non-urgent treatment for illness sooner and with more choice. Our article on whether you need health insurance if you have the public system covers this in more detail.
How SHARE - The Advisory can help
An adviser can show you how different excess levels change your premium, explain how each insurer applies the excess, and help you weigh up other changes to keep your cover affordable. Learn more about our health insurance advice or talk to an adviser about your options.
Conclusion
The right health insurance excess balances what you pay each year with what you would pay if you claimed. Pick an amount you could cover from savings, check whether the excess applies per claim or per year, and compare quotes at a few different levels.
If your premium is becoming hard to manage, look at your excess and optional benefits before you look at cancelling. This article is general information only and is not personalised advice.
Frequently Asked Questions
What is a health insurance excess in NZ?
The excess is the amount you pay towards a claim before your insurer pays the remaining eligible costs. The amount and how often you pay the excess depend on your policy.
Does a higher excess lower my health insurance premium?
Usually, yes. The size of the saving depends on the insurer, the policy and your age, so compare quotes at several excess levels.
Is the health insurance excess per claim or per year?
That depends on the policy. Some apply the excess per claim, some per condition, and some per person per policy year. Check the wording or ask your adviser.
Can I change my health insurance excess?
Many insurers let you change your excess, often at your policy anniversary. Raising the excess is usually simple, but lowering the excess may involve new health questions.
Is raising my excess better than cancelling my health insurance?
For many people, yes. Keeping your cover with a higher excess protects you from large costs and avoids new exclusions that could apply if you reapply later.