Need to know
- Health insurance premiums are going up from 1 April, so if you've got private health cover, it's a good time to make sure you're getting the best value
- Consider whether you need extras cover, whether you're planning to start a family, and the advantages of taking out cover before you turn 30
- Compare health insurance policies and find out how to get a discount with Medibank, Bupa and NIB
If you're young and healthy, you may just want the cheapest private health cover to avoid extra tax and loadings. Or perhaps you're planning to start a family soon and want to make sure you're covered for private treatment. Then there's extras – is it really worth it?
Health insurance comes with a lot of questions, so here's our guide to help you find the answers and make the right choice for you. Insurance premiums will increase from 1 April for some private health funds, so use our tool to compare health insurance policies to help make sense of your options and confirm you're getting the best deal.
On this page:
- Do you need health insurance at all?
- Should you get insurance to avoid the Lifetime Health Cover loading?
- Are you eligible for a discount on health insurance?
- Is it cheaper to take out a couples policy with your partner?
- Do you need cover that includes pregnancy, or a family policy?
- Is extras cover worth it?
- Five steps to better, cheaper health insurance
Do you need health insurance at all?
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'll save you money at tax time.
Beware the junk policies
If you've decided that private health insurance is worth having, be careful not to 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, or 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 health cover beneath Bronze, Silver and Gold), as they're often poor value.
Any cover Basic policies provide is often of questionable value
These policies 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 the event of an accident, or private psychiatric facilities for mental illness.
Any cover the Basic policies do provide is often of questionable value – for example, accident cover can expire before treatments are finished.
Should you get insurance to avoid the Lifetime Health Cover loading?
If you take out hospital cover after you're 31, or if you have any long gaps between cover, you'll have to pay the 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, physio etc.) won't help you avoid the LHC loading.
Under the age of 30? Some health funds offer a discount on their policies.
Are you eligible for a discount on health insurance?
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 aged 18–25. If you stay on that policy, you'll keep getting the full discount until you turn 41. With some funds you can even keep it when you switch 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's still cheaper than one with a discount.
Is it cheaper to take out a couples policy with your partner?
It's not usually cheaper to take out a couples policy. Couples policies often just cost 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 you need a more expensive policy that covers major dental such as bridges and crowns, whereas your partner could take out a cheaper policy as they only use dental check-ups, physio and massages), which means it may be cheaper for you to opt for two separate singles policies with different levels of cover.
Do you need cover that includes pregnancy, or a family policy?
If you're planning a family and want to have private health cover for birth-related services, you need to get Gold hospital insurance at least 12 months before giving birth (this is to make sure you've served the 12-month waiting period 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 1–3 months before they're born, but some health funds require up to 12 months.
If your 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. Your 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.
Is extras cover worth it?
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.
Remember 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, review the past year and see if you got back more from your fund than you paid.
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 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.
Five steps to better, cheaper health insurance
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 editors saved herself over $1800 annually just by reviewing and switching cover for her young family.
Follow these five easy steps below.
Stock images: Getty, unless otherwise stated.
