Cancelling Health Insurance: Pros and Cons

6 March 2018

Originally published by TJ Ryan, March 3, 2017

 How do I cancel my health insurance policy? Should you cancel health insurance or just switch policies or providers?

How to cancel health insurance

It is easy to cancel a health insurance policy. It usually just means picking up the phone, sending an email, or logging into an online membership portal and cancelling your health insurance.

You will need to be up to date on paying your insurance premiums and other fees. Your health fund should pay back any insurance premiums you have paid in advance, less their administration fee to close the account.

When you cancel your health insurance and switch to a new insurer, make sure your old health fund sends you the clearance certificate within 14 days so that you don’t have to wait out the waiting periods all over again with your new insurer. Late clearance certificates are one of the most common complaints made to the Private Health Insurance Ombudsman (PHIO).

Before you cancel your policy, be sure to line up equivalent coverage with a different health insurance provider. Check out the table below which displays a snapshot of health insurance product offerings, sorted by Star Rating (highest to lowest), with links to providers’ websites. Please note that this table is formulated based on a couple seeking hospital cover in NSW. 

Should you cancel your health insurance?

Before you cancel your health insurance policy, consider the question of whether it’s worth holding onto your health cover. The benefits may outweigh the cost and if you can afford to pay for private health insurance that covers your needs, it is a wise move to hold onto that insurance. We explain your other options below.

The many benefits of taking out private health insurance are compelling reasons not to cancel health insurance:

Apart from that, there’s the fact that cancelling health insurance comes with two potential penalties.

First, if you are without private health insurance for more than 1,094 Days of Absence (i.e. 3 years less one day) during your lifetime, you will pay Lifetime Health Cover (LHC) loading if you ever decide to apply for health insurance in the future.

If you cancel health insurance and earn over a certain income per year, you will have to pay the Medicare Levy Surcharge. (Find out whether that applies to you here.)

Can I get a refund if I cancel my health insurance?

You can only get a full refund of your premiums paid for that period if it is a new policy and you are within the 30-day cooling off period.

However, you will be able to get a refund on some of your premiums if you paid for a full year and are cancelling mid-year. Always check your insurer’s refund policy before cancelling your health insurance as some funds pay deduce an administration charge from your refund.

Will I have to restart the waiting periods?

If you are switching to a new health insurance policy immediately, you should not have to redo any of the waiting periods already served. However, if you are upgrading to a higher level of cover in your new policy, you will have to serve the waiting period on any cover that wasn’t included in your old policy.

If you are cancelling your health insurance and not planning to open a new one immediately, then you may have to restart all waiting periods you served under your old policy when you open a new health insurance policy later.

Cancelling health insurance because it costs too much

We would not be surprised if you were cancelling your health insurance because it costs too much. Health insurance premiums in Australia are on the rise, but you don’t have to settle for a choice between an expensive policy or no cover at all. If you’re not getting back more in benefits claimed than you are paying in annual premiums for your insurance policy, then it’s time to look around for a different provider or a different policy.

We can help you find a policy you can afford – that still covers what you need. We compare different health insurance policies and providers for price and value for money, coverage and benefits, and terms and conditions, so you can find a health fund that suits your needs and your budget:

Cancelling health insurance because you got married

If you’re cancelling your health insurance because you’re joining your partner’s health fund – no worries. Just make sure that your partner’s health fund can provide the cover you need before making the move.

Cancelling health insurance to go overseas

Australians travelling overseas for an extended period of time can get a suspension or a “freeze” on their insurance policy while they are overseas. So there’s no need to fully cancel your policy. Ask your insurer what length of trip you can suspend your account for.

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