How much cover is enough?

Under-insurance is a big problem in Australia and it has infiltrated every area of the insurance market. It’s often the home and contents insurance horror stories we hear about in the media. For instance, many of those whose homes were destroyed in floods or by Cyclone Yasi can’t afford to rebuild because they did not have sufficient cover, others had no cover at all.

As far as material possessions go, your home and property may be replaceable. But imagine if you or your family’s health was at risk and you couldn’t afford the necessary treatment or medication.

Hospital treatment and other therapies can easily run into the hundreds of thousands of dollars and without the appropriate level of private health insurance you may be left to foot the bill. In Australia, we’re fortunate to have a good publically-funded health system. But Medicare doesn’t cover all eventualities – if you want to see a specific doctor or be treated in the hospital of your choice for instance, you may need to join a private health fund.

Hospital and extras explained

Predicting your future health may be as tricky as predicting tomorrow’s weather, so knowing how much cover is sufficient can be a challenge. That’s why most providers offer private health packages designed for different life stages – such as young couples or singles, for instance – to make choosing easier. 

There are two main types of private health insurance; hospital cover and extras and you may choose to purchase these separately or combined. Other policies also exist to cover just public hospital or just ambulance– because Medicare doesn’t cover the cost of the expensive ride.

Depending on the types of procedures and services you determine to be most important, your level of cover will vary, as will the premium. So higher level covers allow for a wider variety of procedures to be claimed for with more money being refunded, but you’ll pay for the privilege in the premium.   

Inclusions may differ drastically between providers, so you’ll need to read the product disclosure statement before you purchase.

Extras cover is for those services that you can use every day to maintain health – such as going to the dentist or chiropractor, or getting a new pair of frames at the optometrist. Some providers may even cover the cost of fitness centre sign up fees or a new pair of running shoes. Exact inclusions, spend limits and waiting period apply so check these with your provider.

Finally, your hospital and extras policies don’t need to be held with the same provider and by comparing options online for each separately, you may save money and find policies to better suit your needs. That’s because one health fund may pay higher rebates for the services you require, while another offers hospital cover at a better price. So it pays to shop around to ensure you have the appropriate level of cover to protect yourself against unforseen events and reduce your outlay.