We often like to think our loyalty as a customer will lead to earning discounts or rewards but that’s not always the case. When it comes to health insurance, it could just end up costing you more.
For the last seven years, 1 April has seen a rise in private health cover premiums, and this year the cost is set to climb by an average of 4.84%.
It’s a sting to the hip pocket that no fund member relishes. Yet while we are often quick to shop around for a better deal on low value purchases, surprisingly few people switch between heath funds as a way to save on premiums.
Analysis by comparison site Finder shows the average adult sticks with the same health fund for 12 years. But that loyalty hasn’t resulted in any real financial reward. Finder also found that of the big four health funds, NIB’s premiums have increased by 48.7% since 2010, HCF 46.6%, Medibank 45.3%, and Bupa 43.7%.
These solid price hikes mean private health cover is not cheap. The average cost of hospital and extras cover in Australia is $4,139 per year. Affording annual increases in the premiums can be difficult, however there are ways to trim the cost without compromising your cover.
With dozens of private health funds to choose from, it makes sense to shop around as premiums vary significantly. The independent comparison website privatehealth.gov.au makes it easy to see which fund has the most affordable cover for your needs.
It’s also worth taking a look at whether you are eligible to join a restricted membership fund. These types of funds have raised premiums by considerably less than the big health funds since 2010, and they are open to people working in a broad range of industries including defence, transport, teaching and health. In some cases, family members and former employees may be able to join the fund.
Switching to a different health fund shouldn’t mean re-serving a waiting period as long as you transfer to a policy with the same or a lower level of cover. It’s only if your new health plan includes new or higher benefits that you will have to wait for those benefits to kick in.
If you’re happy with your current fund, and you have the cash available, it’s possible to save on health cover by paying a year’s worth of premiums upfront before 31 March. It’s a big amount, I know, but it can mean getting another year of cover at the old price.
The main point is to explore ways to save on private health cover especially if it means the difference between bailing out of the system altogether or staying insured.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
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