The ins and outs of private health cover

Whether or not to take out private health insurance is a major financial decision. This article discusses the benefits of health insurance, how to find the right policy, and lists key incentives to go private.

The ins and outs of private health cover

With premiums often running to thousands of dollars per year, whether or not to take out private health insurance is a major financial decision. Here are some of the key issues you need to consider in making that decision.

Why go private?

There are two main types of private health insurance: hospital cover, and general treatment (or extras) cover. In some states you may also need to take out ambulance cover.

  • Many common treatments, including physiotherapy, optical and dentistry, are not covered by Medicare. Taking out extras insurance can cover these.
  • Private hospital insurance allows you to choose your own doctor.
  • Waiting times for elective surgery may be considerably shorter in the private system, and you may have more choice as to when you are admitted.
  • You may be accommodated in a private room, if available.

Finding the right policy

As with most insurance, choosing the right health insurance policy involves finding a balance between costs and potential benefits.

To make comparison of the hospital insurance offered by different insurers simpler (though not necessarily ‘simple’), all hospital policies must be classified as Basic, Bronze, Silver or Gold, and insurers need to state what is and isn’t covered by each policy. For example, a policy may cover chemotherapy but not treatment of cardiovascular disease.

In deciding which level of cover to opt for, some key questions are:

  • What are your health care needs? How old are you and how is your age likely to influence your needs?
  • What are the waiting periods when initially taking out health insurance or upgrading your cover?
  • Does a policy provide full cover, or will there be out of pocket costs?
  • To reduce your premiums, should you opt for an excess on your hospital insurance?
  • What extras are you most likely to use? What are the annual caps you can claim for each type of treatment? What level of benefits are payable on common claims such as dental check ups or spectacles?

Incentives to go private

An effective private health insurance system helps to take a lot of strain off the public health system, so the government offers a range of incentives to take out and maintain private cover.

  • Private Health Insurance Rebate. This is essentially a refund from the government of a portion of the premiums for hospital, extras and ambulance insurance. The amount depends on age and income, and is up to 25% for under-65s or up to 33.4% for the over-70s. It can be claimed as a reduction in premiums or via your annual tax return.
  • Age-based Discount. This is an incentive for younger people to take out insurance. It gives insurers the option to offer a discount of up to 10% of hospital premiums. The discount drops by 2% for each year over 25, but once in place it continues until age 40, then decreases by 2% per year.
  • Medicare Levy Surcharge. Most taxpayers pay the Medicare levy of 2%. If higher-income earners don’t have private hospital insurance, they may be up for the Medicare Levy surcharge. This ranges from 1% to 1.5% of income. It may be cheaper to take out a basic eligible policy rather than pay the surcharge.
  • Lifetime Health Cover (LHC). This is a disincentive for delaying taking out hospital cover until later in life when it might be most needed. For each year over the age of 30 that you delay taking out hospital cover your premium will increase by 2%. The maximum LHC loading is 70%, and the increased premiums stop after 10 years of continuous cover.

Complex as it is, taking control of your private health insurance will help you ensure that you aren’t spending money on cover you don’t need, or, more importantly, that you do have adequate cover should you need it.

For further information, go to www.privatehealth.gov.au.

Small business insurance – why you need it

Every business is unique, and the requirements of suitable business insurance are just as unique as each business. Using a case study, this article analyses the many insurances available and highlights the importance of seeking professional advice when acquiring cover for your business.

 

Small business insurance – why you need it

Several years ago, Steve and Brian started a small web-design business, GotyaOnline. Steve was responsible for growing and supporting their client-base, while Brian designed and built the websites.

Expanding to include maintenance of client databases and online shopping facilities, they bought new technical equipment and rented office space.

Recognising the importance of insurance, they sought professional advice about suitable cover for a small business like GotyaOnline.

Uppermost in their minds were the different kinds of losses they needed to insure against, such as:

  • Property/equipment damage or loss
  • Loss of Key personnel
  • Cyber attack and ransomware

Any of these events could potentially lead to business interruption, security breaches and reputational damage, all of which may expose GotyaOnline to legal action.

With assistance from their planner, Steve and Brian conducted a business risk analysis and considered the following insurances:

 

Property and assets cover

GotyaOnline owned state-of-the-art equipment to manage its clients’ online operations. Property and assets cover would insure against equipment damage or loss resulting from fire, flood, theft, etc., the kinds of events that could potentially lead to business interruption and GotyaOnline being unable to fulfil business commitments.

 

Revenue insurance

This cover helps support a business experiencing loss of revenue or profits resulting from an event causing computer failure or business interruption. Cover is in the form of compensation to help keep the business operating during prescribed hard times.

 

Key person insurance

Steve and Brian are both integral to GotyaOnline’s operations and client account management. If either was unable to work due to illness or injury, the business could suffer considerably.

Insurance provides financial support enabling the business to engage suitably qualified people and systems to minimise the impact to GotyaOnline and its clients.

 

Professional indemnity

This protects Steve and Brian against liability for damages, occurring in the course of their business, and the costs associated with defending legal claims brought against them by clients.

 

Shareholder insurance

This specific type of life cover protects shareholders if something were to happen to one of them. It provides a lump sum payment enabling the surviving shareholder to purchase the other’s shares, at a previously agreed price.

It offers surety for an effective business succession plan if one of the partners was suddenly out-of-the-picture through death or disability.

 

Cyber insurance

This covers a business’s liability if subject to a data breach involving sensitive customer information, names, addresses, credit-card details, etc.

With more businesses storing data ‘in the cloud’ and functioning online, this form of insurance is increasingly relevant.

Steve and Brian’s adviser assisted them in understanding their risks and developing a contingency plan that included an insurance portfolio tailored to GotyaOnline’s specific requirements.

When a neighbourhood power surge knocked out GotyaOnline’s systems, it caused physical computer damage and disabled web-connectivity. Besides GotyaOnline being offline, its clients couldn’t access customer databases, potentially exposing GotyaOnline to legal and reputational damage.

GotyaOnline’s insurance provided financial support to quickly restore the business’s online connectivity, and replace damaged equipment. Within 24 hours, GotyaOnline was returned to operation with minimal interruption to the business or its clients.

Every business is different and no one solution covers all. If you’re uncertain about insurance, speak to a qualified professional and get the most appropriate cover for your business needs