What Does a Health Insurance Excess Actually Save You in NZ (2026)?

A higher excess lowers your premium, but only saves you money if you stay relatively claim-free. Here is how a $250, $500, $1,000 or $2,000 health insurance excess changes your NZ premium and out-of-pocket costs in 2026, with a breakeven table.

TL;DR: A higher excess lowers your premium, on Southern Cross analysis a surgical excess of about $1,000-$4,000 can cut premiums by roughly 20-40% ⁵. But it only saves you money if you stay relatively claim-free, because you pay that excess each time you make a qualifying claim. This is general information, not advice.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances.

Around 1.4 million New Zealanders, roughly one in four people, hold some form of private health insurance, used to help cover treatment that is not funded, or that comes with long waits, in the public system ⁸. One of the levers that shapes what you pay for that cover is the excess. Choosing a higher one is one of the few ways to pull a premium down without dropping cover, but it is a trade, not a free saving. This guide walks through how the excess works, the levels Southern Cross and nib offer, how much premium a higher excess actually saves, and where the breakeven sits.

What is a health insurance excess and how does it work in NZ?

A health insurance excess is the amount you agree to pay yourself towards an eligible claim before the insurer starts paying. It is the same idea as the excess on your car or house cover: you carry the first slice of the cost, and the insurer covers the rest, up to the policy limits.

In exchange for carrying that first slice, your premium is lower. Southern Cross states plainly that the higher the excess you select, the lower your premium will be ². That is the whole mechanism. You are taking on a defined, capped amount of risk yourself, and the insurer charges you less because it expects to pay out less.

Two points matter from the start. First, the excess generally applies to major claims such as surgery, not to every benefit, on Southern Cross Wellbeing plans it does not apply to all benefits, for example optional modules ². Second, whether any claim is paid at all depends on the policy terms, exclusions, stand-down periods and your disclosure, the excess only governs how much you contribute once a claim is accepted. This is a summary only, always read the policy wording or product disclosure statement.

What excess levels do Southern Cross and nib offer?

The options differ by provider and by plan, so it is worth being precise.

Southern Cross lets members on its Wellbeing One and Wellbeing Two plans choose an excess of $500, $1,000, $2,000 or $4,000 ¹. That excess is payable per person, per claims year, meaning each insured person pays their own excess once in a claims year before the society begins refunding eligible claims ¹. On its budget-tier plans, KiwiCare Budget and RegularCare Budget, a fixed $500 excess applies per person, per claims year, with no other excess options available on those plans ³.

nib New Zealand, on its Ultimate Health and Ultimate Health Max plans, applies the excess to the claims each insured person makes under their Base Cover in the policy year. Once a person reaches their excess, nib pays further eligible claims for the rest of that policy year ⁴. So the structure is similar to Southern Cross in spirit, per person, across a policy year, rather than charged on every single claim.

Source: Southern Cross Health Society help page ¹³; nib Ultimate Health brochure ⁴, current as at 18 June 2025. This is not every plan or provider in the market, always check each provider's product disclosure statement.

How much does a higher excess cut your premium?

This is where the saving lives. The exact discount is not published as a fixed rate and varies by age, plan and provider, but the direction and rough scale are well established.

Southern Cross-focused analysis indicates that a surgical excess of roughly $1,000 to $4,000 can reduce premiums by about 20-40% ⁵. On the Wellbeing plans, that excess applies mainly to surgical, chemotherapy and radiotherapy claims rather than to GP or specialist visits ⁵. So a household trading up from a $500 excess to a $2,000 or $4,000 one is buying a meaningful premium reduction in return for carrying more of any future surgical bill themselves.

The reason this lever matters more each year is cost pressure on the underlying claims. Health insurance is one of the fastest-rising household insurance costs in New Zealand, with renewal increases commonly in the low double digits. nib New Zealand reported its health insurance claims rose about 24% in the 12 months to 30 June 2025, with an average of 2.08 claims per policy, up from 1.68 ⁶. Claims inflation feeds straight into premiums: nib paid out about $240 million in healthcare claims from July 2024 to April 2025, up roughly 27% on the prior year ⁷. As premiums climb, the dollar value of an excess-driven discount climbs with them, which is part of why more people look at their excess at renewal.

At what point does a high excess cost you more than it saves?

A higher excess is a saving only while you stay relatively claim-free. The moment you make a qualifying claim, you pay that larger excess yourself, and across a few claim years the extra out-of-pocket can outweigh the premium you saved.

The figure below sets this out for a single illustrative profile. The premium-saving column uses the broad 20-40% range from the Southern Cross analysis ⁵ applied to an assumed base premium, and the out-of-pocket column simply reflects the excess you would pay on one qualifying claim. Treat every number here as an illustration to show the mechanics, not a quote or a prediction, your own premium and usage will differ.

Figure: Excess vs premium, where the breakeven sits (single illustrative profile, 2026)

Source: illustrative, based on provider premium schedules and the Southern Cross premium analysis ⁵, 2026. Note: Southern Cross Wellbeing excesses start at $500 ¹; the $250 row is shown only as a baseline for the comparison. Figures are illustrations, not predictions or quotes; actual premiums and savings will differ.

The pattern is the same across the rows. The premium saving from a higher excess typically takes a few claim-free years to add up to the excess you would pay on a single claim. If you go several years without a qualifying claim, the higher excess wins. If you claim every year or two, a high excess can cost you more than it saved. Which side of that line you sit on depends on your health, your family, and how often you expect to use private surgery, none of which a table can know for you.

Does the excess apply per claim, per year, or per person?

This is one of the most misunderstood parts of an excess, and it changes the maths a lot.

On Southern Cross Wellbeing plans, the excess is per person, per claims year ¹. Each insured person pays their own excess once in a claims year, then eligible claims are refunded for the rest of that year ¹. On nib's Ultimate Health and Ultimate Health Max, the excess applies to each insured person's claims under Base Cover across the policy year, and once a person reaches it, nib covers further eligible claims for the rest of that year ⁴.

The key thing both share: the excess is generally not charged on every separate claim. If you have two procedures in the same claims or policy year, you do not usually pay the excess twice for the same person, you pay it once that year and the insurer covers eligible claims after that. That is more forgiving than a per-claim excess would be, and it is worth confirming against your own policy wording, because the per-person, per-year structure is what makes a higher excess less punishing than it first looks.

How does excess choice interact with a family policy?

On a family policy the per-person nature of the excess is the detail that catches people out. Because the Southern Cross Wellbeing excess applies per person, per claims year ¹, a $2,000 excess on a family of four is not a single $2,000 ceiling, it is potentially $2,000 for each insured person who makes a qualifying claim in the same year.

In practice, most years most family members will not have a major surgical claim, so the higher excess still tends to reduce the overall premium for the household. But the worst-case exposure scales with the number of people on the policy. A bad year in which, say, two family members each need surgery could mean two excesses, not one.

That trade, lower premium now against a larger potential bill if more than one person claims in a year, is a genuine balancing act, and it is one of the more common things to weigh on a family plan. Some households are comfortable carrying that risk to keep the premium down; others prefer the certainty of a lower excess. There is no single right answer, and it depends on the size and health of the family. To work through what fits your household, personalised advice is the place to do it.

When does a high excess make sense and when does it not?

Pulling the threads together, a higher excess tends to suit and tends not to suit fairly identifiable situations, though your own circumstances will differ.

A higher excess may suit people who:

• Have a healthy emergency fund and could comfortably pay the excess out of savings if they had to.
• Expect to claim infrequently, and are mainly buying the cover for the rare, large surgical event rather than routine treatment.
• Want to keep cover in place but need to bring a rising renewal premium back under control ⁶⁷.

A higher excess may not suit people who:

• Would struggle to find the excess amount at short notice, in which case a high excess can turn a covered event into a cash-flow problem.
• Have known ongoing health needs, or a family where claims are likely most years, so the saving keeps getting eaten by repeated excesses.
• Value certainty and predictable costs over the lower premium.

None of this is a recommendation either way, and the right excess is not the same as the cheapest premium. The mechanics here, premium, excess, claim likelihood, all interact, which is exactly the kind of like-for-like comparison an adviser runs; see how advisers compare insurers in NZ and a side-by-side of two common choices in Southern Cross vs nib health insurance. For the bigger-picture case for holding cover at all, see the importance of medical insurance, and for a wider view of who offers what, health insurance providers in NZ.

Whether a claim is paid depends on the terms, conditions, exclusions, stand-down periods and underwriting of the specific policy, and on your disclosure. This is a summary only, always read the policy wording or product disclosure statement.

Frequently asked questions

How much does a higher health insurance excess save in NZ? On Southern Cross-focused analysis, a surgical excess of roughly $1,000 to $4,000 can reduce premiums by about 20-40% ⁵. The exact figure depends on your age, plan and provider, and is not published as a fixed rate. The saving is real, but it only works in your favour if you stay relatively claim-free, because you pay the larger excess each claims year you make a qualifying claim.

What excess can I choose with Southern Cross and nib? Southern Cross Wellbeing One and Two members can choose $500, $1,000, $2,000 or $4,000, payable per person, per claims year ¹. Its budget plans (KiwiCare Budget and RegularCare Budget) carry a fixed $500 excess with no other options ³. nib's Ultimate Health and Ultimate Health Max apply the excess per person, per policy year under Base Cover, and once a person reaches it, nib pays further eligible claims for the rest of that year ⁴. Always check the current product disclosure statement.

Do I pay the excess on every claim? Generally no. On both Southern Cross Wellbeing and nib Ultimate Health, the excess is per person, per year, not per claim ¹⁴. Once an insured person has paid their excess in a claims or policy year, eligible claims are covered for the rest of that year. If you had two procedures in the same year, you would usually pay the excess once for that person, not twice. Confirm the detail against your own policy wording.

Does a higher excess make sense on a family policy? It can, but the excess applies per person, so a $2,000 excess on a family of four is potentially $2,000 for each person who makes a qualifying claim in the same year ¹. Most years that worst case will not happen, so the higher excess usually still lowers the household premium, but the potential exposure scales with the number of people on the policy. Whether it suits your family depends on its size and health, book a conversation to work it through.

Why do health insurance premiums keep rising regardless of excess? Because the cost of the underlying claims is rising fast. nib reported claims up about 24% in the year to 30 June 2025, with 2.08 claims per policy ⁶, and paid out around $240 million from July 2024 to April 2025, up roughly 27% ⁷. That claims inflation flows into renewal premiums across the market. Choosing a higher excess can offset some of the increase, but it does not stop the underlying cost pressure.

Is the cheapest premium always the best excess choice? No. The lowest premium usually comes with the highest excess, which means the largest amount you would pay yourself if you claim. The right excess balances the premium saving against how easily you could fund the excess and how often you expect to claim. This is general information, not a recommendation, personalised advice works through what fits your situation.

Returns are not guaranteed where investments are concerned; this article concerns insurance, not investment. Whether a claim is paid depends on the terms, conditions, exclusions, stand-down periods and underwriting of the specific policy, and on your disclosure. This is a summary only, always read the policy wording or product disclosure statement. This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances. Smiths Financial is a trading name of Craig Smith Business Services Ltd (FSP712931), which holds a Class 2 financial advice provider licence issued by the Financial Markets Authority to provide financial advice on personal risk insurance, health insurance, general insurance, KiwiSaver and managed funds. Our advisers, Henry Smith (Financial Adviser) and Craig Smith (Principal Adviser), are bound by the Code of Professional Conduct for Financial Advice Services and the duty to give priority to clients' interests. Craig Smith Business Services Ltd is a member of the Financial Dispute Resolution Service (FDRS), a free and independent dispute resolution scheme. We're generally paid by commission from the insurer or provider when you take out a policy or product through us; this doesn't change the premium or price you pay. Some arrangements may involve a fee, which we agree with you first. We manage any conflicts of interest in line with our duty to prioritise your interests, full details in our Disclosure. Written by Henry Smith, Financial Adviser at Smiths Financial (FSP712931); reviewed by Craig Smith, Principal Adviser. Last reviewed 18 June 2025.