Ask LH: Do I Need Full Hospital Cover?

Dear Lifehacker, As a 25 year old male with a long-term partner, with no medical problems, do I need hospital cover or can I get away with just extras cover? Thanks, Insurance Investigator

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Dear II,

Health funds typically include two elements: hospital cover (which pays for admission to a private hospital in the event of illness and accident), and extras cover (which offers full or partial payment for other services such as dentists or chiropractors). What’s paid for under both varies widely depending on the policy you have and how much it costs (the higher the charge, the more extras will be included).

Most funds offer hospital cover with extras as an added possibility, but you can theoretically sign up for extras cover without signing up for hospital cover. That might make sense, if, for example, you qualify for free hospital cover due to military service, but it’s an unusual situation.

The short answer to your question: you definitely want hospital cover ahead of extras cover. Quite aside from knowing that you’ll be covered in the event of an unexpected accident, you’re likely to end up paying out additional money in tax if you don’t.

To encourage the uptake of private health insurance (and reduce expenditure in the public health system), anyone earning above a specific level who doesn’t have hospital cover has to pay an additional Medicare Levy surcharge. In 2012-2013, this level is $84,000 for individuals. (While you have a partner, that isn’t relevant for the purposes of the surcharge unless you have children.) If you’re earning more than that per year, then you’ll have to pay a surcharge of at least 1 per cent (and potentially as much as 1.5 per cent) as part of your tax bill.

Given the choice, most people choose to spend that money on health cover instead. However, you must have private patient hospital cover to avoid the levy. An extras-only policy won’t qualify, and you could be hit with the levy if you earn above that number.

Without knowing your exact income and situation, it’s impossible to provide an absolute answer (and you should check with a professional if you require detailed tax advice). But getting health insurance that doesn’t include hospital cover often doesn’t make sense: if you’re earning more than $84,000, you’ll end up paying that money for the Medicare levy surcharge anyway.


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