How Excess Affects Your Premium
A $250 excess might cost $100/month ($1,200/year). A $500 excess on the same cover costs $85/month ($1,020/year) — a $180 annual saving. A $1,000 excess costs $70/month ($840/year) — a $360 annual saving compared to the lowest excess.
But the higher excess only makes sense if you can afford to pay it out-of-pocket without financial strain.
The Break-Even Math
At what point does a higher excess start saving you money?
Simple calculation: If you claim once every three years on average, a $1,000 excess costs you $1,000 per claim. Your premium is $60/month lower ($720/year). Over three years: you save $2,160 in premiums and spend $1,000 in excess. Net savings: $1,160.
If you claim every year, the $1,000 excess costs $1,000/year, and your premium saving of $720/year means you're actually paying more overall.
The break-even for a $1,000 excess is if you claim about once every 18 months.
Know Your Claim Pattern
Before choosing a high excess, review your actual healthcare use over the past 3-5 years: - How many times did you see a specialist? - How many diagnostic tests did you have? - How many times would you have claimed if you had insurance?
If you average one claim per year, keep your excess at $250-500. If you average one claim every two years or less, a $1,000 excess makes sense.
The Emergency Fund Requirement
A $1,000 excess only works if you have $1,000 in emergency savings. If your excess would force you to use credit or borrow money, it's too high.
Minimum: ensure you have excess amount × 2 in emergency savings (so you can cover one claim and still have reserves).
The Staged Approach
A practical strategy is increasing your excess as your savings grow:
- Ages 25-35, low savings: $250 excess, more expensive premiums.
- Ages 35-45, building savings: move to $500 excess as you build reserves.
- Ages 45+, solid savings: move to $1,000 excess, lowest premiums.
This matches your excess to your financial stability rather than forcing an uncomfortable choice.
The Chronic Condition Question
If you have an ongoing condition (arthritis, heart disease, diabetes), you'll claim regularly (specialist consultations every 6-12 months). For these people, a high excess is expensive.
If you claim twice per year at $1,000 excess, you're paying $2,000/year in excess. The $300-400 you save in premiums doesn't offset it.
For chronic conditions, keep your excess moderate ($250-500).