If you’ve ever taken out private health insurance—or considered it—you’ve probably noticed that premiums can vary quite a bit. While some reasons behind these costs are obvious, such as the level of cover you choose, other influences are less well-known. From your age to your postcode, many elements play a role in shaping how much you’ll pay.
Understanding these factors can help you make more informed choices and possibly save money without sacrificing the protection you need. Here are ten of the biggest contributors to the cost of your health insurance.
1. Age and Lifetime Health Cover (LHC) loading
The earlier you secure hospital cover, the cheaper it will be in the long run. In Australia, if you don’t have hospital insurance by the 1st of July after your 31st birthday, you’ll pay a 2% loading for every year you delay. This can climb to a maximum of 70%. While the surcharge is eventually removed after 10 continuous years of cover, it can add a significant cost in the meantime. Importantly, extras-only policies are not affected by this rule.
2. Income and government incentives
Your income impacts both penalties and savings. High-income earners who don’t have hospital cover may be charged the Medicare Levy Surcharge (MLS), which ranges from 1% to 1.5% of taxable income. On the flip side, the government offers rebates on private health insurance premiums, scaled according to age and income. Lower earners tend to get more generous rebates, making insurance more affordable for some households.
3. Level of cover
Private health policies are grouped into tiers: Basic, Bronze, Silver, and Gold. The higher the tier, the more treatments are included—and the more you’ll pay. A Silver or Gold plan can be valuable for families, older Australians, or anyone with ongoing medical needs, while younger and healthier people may opt for Basic or Bronze just to avoid tax penalties.
4. Type of policy: hospital, extras, or both
You can choose between hospital cover, extras cover, or a combined policy. Hospital cover pays for treatment as a private patient, extras cover looks after services like dental or physio, and combined policies offer both. While convenient, combined cover often costs more, especially if you don’t use extras frequently.
5. Family circumstances
Who is included on your policy makes a difference. Singles cover is cheapest, couples’ cover is usually more economical than two separate single policies, and family or single-parent cover comes at a higher rate. Keeping your policy updated as life changes—such as having children or separating—helps prevent overpaying or missing out on suitable benefits.
6. Where you live
Location plays a surprisingly big role. States and regions with more private hospitals or higher healthcare demand often come with higher premiums. In rural areas with limited private healthcare options, you may find you get less value from private insurance compared to people in cities. If you’re moving interstate, it’s worth checking how your costs might change.
7. Excess and co-payments
Agreeing to pay a higher excess can bring down your monthly premium, but it means you’ll have more out-of-pocket costs when you actually use your cover. Some policies also include daily co-payments for hospital stays, which can add up quickly. Couples and families can sometimes share the excess to ease the burden.
8. Annual premium rises
Premiums almost always increase on April 1 each year, reflecting higher medical costs, new technologies, and growing demand for services. While the average increase is around 4–5% annually, the exact figure depends on your insurer and policy. Paying for a year in advance before April can lock in the lower rate, and regularly comparing policies can help you stay ahead of price hikes.
9. Waiting periods and pre-existing conditions
When you first sign up or switch insurers, you’ll usually face waiting periods before you can claim on certain services. Standard waiting times include 12 months for pregnancy and pre-existing conditions, and two months for most other treatments. While these don’t raise your premiums, they affect when you can actually benefit from your policy, so they’re worth factoring into your decision.
10. How often you review your policy
Many Australians set and forget their health insurance, but this often means paying more than necessary. Insurers frequently update policies, so sticking with the same one year after year could mean missing out on better value elsewhere. Reviewing your policy annually is one of the easiest ways to avoid the so-called “lazy tax.”
Final Thoughts
The cost of health insurance isn’t random—it’s shaped by a combination of personal, financial, and regional factors. By understanding what drives your premiums, you can make smarter choices, avoid unnecessary fees, and find cover that balances affordability with peace of mind. Regularly reassessing your policy is key to making sure you’re always getting the best deal.
