So what exactly is lifetime health cover? What are some of the ways you can save money by understanding lifetime health cover?
The Government implemented an initiative on 1 July 2000 to encourage people to take out private hospital insurance earlier in life and keep this maintained.
What is Lifetime Health Cover (LHC)?
For those who do not have hospital cover from July 1st following their 31st birthday, they have to pay a 2% loading on top of their premiums for every year they are aged over 30.
The maximum loading is 70% but once you have held hospital cover for 10 consecutive years the loading is removed. You may be liable to pay the loading again in the future if you cancel your hospital cover after it is removed.
Features involved in Lifetime Health cover
Gaps in cover
You are able to be without hospital cover for small gaps such as switching funds. The total allowed is 1094 days during your lifetime to not affect your loading (also known as Days of Absence).
Suspension in membership
If your health fund agreements to suspend your hospital cover for a short period it will not affect your Lifetime Health Cover loading.
If you go overseas and cancel your hospital cover, the days outside of Australia are not counted towards to the Days of Absence if you are overseas for at least one continuous year (you can return to Australia for up to 90 days per visit to continue not being liable).
If you are aged 31 and over, new migrants do not have to pay the loading if they get hospital insurance within 12 months of registering for Medicare.
Who is exempt from paying the Lifetime Health Cover Loading?
- You do not have to pay the LHC if you were born on or before July 1st, 1934. At any point in time, you can join a health fund and pay the same premium as someone who takes out cover at 30 years of age.
- If you are an Australian citizen or permanent resident and were overseas on 1st July following your 31st birthday you do not have to pay the loading as long as by your first anniversary of returning to Oz you purchase hospital cover.
- Members of the Australian Defence Force have hospital cover under their provided medical services. On discharge after the 1st of July after 31st birthday you have 1094 days to join a health fund to avoid the loading (If you are discharged before this then normal rules apply).
- Those who have a Department of Veterans’ Affairs Gold Card are considered to have hospital cover and therefore do not need to pay any loadings.
Why is the Lifetime Health Cover important to avoid?
If you were aged 40 and decided to take our hospital cover you would be paying 20% more than someone who first took out hospital cover at age 30. And don’t forget that you have to pay the loading for 10 consecutive years. That is a lot of wasted money.
Private Health Insurance can be expensive as it is, but by taking out the appropriate cover can save money in the long run! Visit privatehealth.gov.au for further information and for calculators to see whether you are liable and for how much.
Click here if you would like to learn more about how to save money on health insurance.