Need to know
- Health insurance premiums will go up on 1 October – now’s the time to review your policy and make sure you are in the one that suits you best
- Things to consider include whether you need extras cover, whether you're planning a family, and the advantages of taking out a policy before you turn 30
- Compare policies on the CHOICE website to find the one that best meets your needs and budget
Finding out which health insurance policy is right for you depends on your life stage. A policy that suits a senior, for example, probably won't be the best option if you're a younger single or couple.
If you're young and healthy, you may just want the cheapest cover to avoid extra tax and loadings. Or perhaps you're planning a family within the next couple of years and want to ensure you are covered for private treatment? And are you really getting value out of the money you spend on extras?
With insurance premiums about to rise on 1 October, now is the time to shop around to make sure you're getting the best deal.
If you're young and healthy, and not planning a family anytime soon, you might decide you don't need private health insurance for hospital cover.
But many young people will find there's a tax benefit to having it.
If you're trying to decide whether it's worth getting or renewing your cover, take our easy quiz to find out if you need health insurance at all and if it will save you money on taxes: Do I need health insurance?
Beware the junk policies
If you've decided that private health insurance is worth having, be careful to not just choose a policy that's being marketed to healthy young people like you.
Health funds often advertise policies that have very low cover to young singles and couples. This is because young people are most likely to want health insurance not so much for the cover but to avoid paying extra tax, known as the Medicare Levy Surcharge (MLS), and to avoid the Lifetime Health Cover (LHC) loading which comes into effect after you turn 31 (see below).
We warn against these so-called 'junk insurance' policies, which are now classified as Basic cover (the lowest type of cover beneath Bronze, Silver and Gold), as they're often poor value.
Any cover Basic policies do provide is often of questionable value
They don't usually cover treatments in private hospital for the most common serious diseases such as cancer, stroke or heart disease, and won't give you access to private rehabilitation facilities in case of an accident, or private psychiatric facilities in case of mental illness.
Any cover they do provide is often of questionable value. For example, accident cover can expire before treatments are finished.
If you take out hospital cover after your 31st birthday, or if you have any long gaps between cover, you'll have to pay the Lifetime Health Cover (LHC) loading on top of your health insurance premium.
How much will that be?
Well, if you're taking out hospital cover for the first time after you turn 31, you'll pay an extra 2% on your premiums for every year you waited.
If you never get private health insurance, the LHC loading will never affect you.
In any case, we crunched the numbers and figured out you're probably better off paying the loading later when you really want insurance, instead of buying insurance you don't want right now just to reduce your bill later on.
Keep in mind that getting extras cover (dental, optical, etc.) won't help you avoid the LHC loading.
Under the age of 30? Some health funds offer a discount on their policies.
In an effort to bring in young people, some health funds are offering discounts to new customers who sign up before they turn 30.
You can get 2% off your premium for every year you're below 30, up to a maximum of 10% for people 18–25. If you stay on that policy, you can keep getting the full discount until you turn 40.
Just over a third of policies offer this discount, and while they tend to be cheaper, they do have lower cover. Check with your provider or ask when you're comparing policies what discounts might apply for your age, but keep in mind you may find a suitable policy that is still cheaper than one with a discount.
Usually not. A couples policy often just costs you double the price of a single policy, so it's unlikely to save you any money.
In fact, having the one policy with one provider might be convenient, but it could mean you're missing out on savings.
You may have different health insurance needs to your partner (for example, perhaps one of you needs more coverage in certain areas than the other), which means it may be cheaper for you to opt for two separate singles policies with different levels of cover.
I may be planning a family soon – do I need to take out cover that includes pregnancy, or a family policy?
If you're planning a family and you wish to have private health cover for birth-related services, you need to get Silver Plus or Gold hospital insurance at least 12 months before giving birth (this is to ensure you've served the 12-month waiting time before you can use the cover).
Once you're pregnant, check with your health fund on when to upgrade to a family policy if you want your baby to have private health cover from birth. You generally need to have a family policy one to three months before they're born, but some health funds require up to 12 months.
If the baby gets admitted as a private patient and isn't yet covered under your policy, this can cost thousands of dollars
If you decide you do want private health cover for your baby from birth, it's a good idea to upgrade sooner rather than later. If you and your partner already have cover, it probably won't cost you any more to upgrade to a family policy – as kids in two-parent families are covered for free. If you'll be a sole parent, unfortunately it will cost more to upgrade to a single-parent policy from a singles policy.
Will your baby need private health insurance?
If you're unsure if you want private hospital insurance for your baby straight away, here are some things to consider:
- If you have an uncomplicated birth and your baby is healthy, they usually won't get admitted to hospital and you probably wouldn't need cover for them.
- If you're in a private hospital and your baby is born early, or has any health issues, they may get admitted to the special care nursery or even an intensive care unit if the hospital has one. The baby would be admitted as a private patient because you're in a private hospital, which can cost thousands of dollars if they aren't yet covered under your policy.
You might think it makes sense to take out extras cover so you get some money back on things such as dental, optical or physiotherapy, but the fact is many people pay more for extras cover than they receive in benefits, which means you might be better off downgrading or dropping it altogether.
(This may also be a good time to remind you that unlike hospital insurance, extras cover has no bearing on the Medicare Levy Surcharge or the Lifetime Health Cover loading, so having it offers no tax benefits.)
Before renewing your extras cover for the year, look back on the past 12 months and see if you got back more from your fund than you paid for it.
According to our calculations, the average annual extras premium for a single person in Australia is about $630, and the average benefit (cash you'll receive back from your provider) is only $435. Work out whether you're going to get value from your extras cover and if you really need it. If not, you could save around $53 on your premiums a month (for a single person in NSW).
Unless you're getting a new pair of glasses every year, anticipating major dental work, or receiving regular treatments such as physiotherapy, you probably won't be using it enough to warrant the outlay in cash. Once you have children, though, extras insurance can be good value as kids are usually insured for free and some funds offer them no-gap cover for services such as dental.
Compare quotes for separate hospital and extras policies (even from different insurers) rather than just combined policies
If you have difficulty budgeting, and you'd rather pay an insurer monthly than fork out hundreds of dollars in one hit for a large dentist bill, extras cover may also be useful. But just be aware you could be paying more than you'll ever get back.
If you want both hospital and extras cover, make sure you compare quotes for separate hospital and extras policies (even from different insurers) rather than just combined policies, as you may well save money.
Our health insurance experts have put together a handy five-step action plan to help you through the process of reviewing, comparing and switching your health insurance policy.
Just a few minutes could potentially save you hundreds of dollars a year: one of our CHOICE editors saved herself over $1800 annually just by reviewing and switching cover for her young family.
Follow these five easy steps below.