Article by guest blogger, Bessie Hassan from Finder.com.au
The end of financial year is nearly upon us, which means that the Lifetime Health Cover (LHC) loading may be coming into effect for those who don’t have private hospital cover yet.
If you’re nearing your 31st birthday and you don’t have private hospital cover, you may want to consider taking out cover now to avoid having an extra fee added to your policy later. If you have no idea what I’m talking about, here are a few things you need to know about how LHC loading may affect you and your health insurance premiums in the future.
Don’t worry, if you already have private hospital insurance and you’ve continuously maintained your cover since 1 July after you turned 31, you won’t need to pay any LHC loading fees. However, if you are nearly 31 and you don’t have any private hospital cover, or you’re over 31 without cover, you might want to think about taking out a policy before the end of the financial year in order to avoid an additional surcharge. If you do take out a new policy, make sure you compare hospital cover online so that you can get the best value for money.
What is it and what does it do?
The purpose of this loading is to encourage Australians to take out and retain a private health insurance policy, so that they’ll be protected in case something goes wrong. If you don’t take out private hospital insurance before 1 July following your 31st birthday, you will face paying an additional 2% financial loading surcharge on top of the base rate premium for your insurance policy, once you do take it out.
In other words, for every year after you turn 31 that you don’t have private hospital cover, you will have to pay 2% more once you do finally take it out. So if you wait five years after your 31st birthday to take out a policy, you will unfortunately end up paying 10% extra on your policy. You should note however, that this fee is capped at a maximum loading of 70% and those born on or before 1 July 1934 don’t have to pay this surcharge.
What if I stop my hospital cover?
Luckily, you can pause your hospital cover for a total of 1,094 days during your lifetime without it having any effect on the status of your LHC loading. You will also be eligible for additional permitted days that won’t add towards your 1,094 days, such as if you’ve been overseas continuously for over a year or if your health insurer has agreed to a period of suspension under special circumstances.
I’m still confused
Don’t worry, there are plenty of resources available online to help explain you how you’ll be affected by LHC loading this year. If you’re still confused, don’t stress. Check out HIF's online LHC calculator to see how much of the loading applies to you.
Bessie Hassan is a Money and Insurance Expert at finder.com.au, Australia’s most visited comparison website.