What is excess in health insurance?

You need to pay an excess when you make a hospital claim, but it can also lower your insurance premium.

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An excess is a sum of money that you need to pay whenever you make a hospital claim. It's an agreement you make with your health fund to take responsibility for some of your health cover costs in return for a lower premium. The higher the excess, the lower your premium should be, and you only pay it if you're admitted to hospital.

What is a hospital insurance policy excess?

A hospital excess is a payment you need to make when you're admitted to hospital. You'll be required to pay this amount upfront when you go to hospital – they will then bill your insurer for the remaining costs.

Some insurers require you to pay an excess every time you're admitted to hospital; others cap the amount at a maximum limit per year.

Pros and cons of a higher excess

Pros

  • The higher the excess you pay, the lower your premiums will be.
  • You only need to pay an excess if you're admitted to hospital.
  • You usually don't have to pay an excess for same-day surgery, even though your premium is lower.

Cons

  • You might also have to pay a co-payment, a daily amount paid towards your hospital stay.
  • If you're a high income earner and you choose an excess over $750, you might have to pay the Medicare Levy Surcharge.
  • If you can't pay your excess when you're admitted to hospital, you might not receive cover.

When don't you need to pay an excess?

Day Surgery

Day Surgery

Many insurers won't charge a health insurance excess if you need to go to hospital for day surgery only.

Accidental injury

Accidental injury

If you're hospitalised because of an accident, most insurers will waive the excess requirement.

Child dependents

Child dependants

Most health funds waive the excess for kids being treated in hospital as an incentive for taking out family cover, and they'll continue to provide cover for dependent children until they reach the age of at least 21.

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Does your hospital cover excess affect your tax?

It can, yes. If you earn above $90,000 p.a. (as a single) or $180,000 p.a. (as a couple), you'll be hit with the Medicare Levy Surcharge, unless you get basic hospital cover. The MLS is an additional tax of between 1% and 1.5% that higher earners need to pay if they don't have adequate hospital cover. Here's what you need to avoid it:

Singles

Singles

A hospital policy with an excess of less than $750

Couples and Families

Couples and Families

A hospital policy with an excess of less than $1,500

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