Suspending your health insurance policy

Can you suspend your health insurance policy?

Most health funds let you suspend your health insurance cover. That said, the minimum and maximum times for which you can suspend cover varies between brands. You'll need to check the fine print, but these rules are typical:

• Most funds require you to be overseas for a minimum period before you can suspend - typically between 2 weeks and 3 months, depending on the fund
• Most funds allow a maximum of 2 years, though some allow 3 years or longer
• The number of suspensions allowed per calendar year is usually limited to 1 or 2
• A separate limit may apply to the maximum suspension allowed for financial hardship, for example 3 months
• There may also be a lifetime limit on the number of financial hardship suspensions permitted

Who is eligible to suspend cover?

Eligibility rules for temporarily suspending your health insurance policy vary between funds. However, to qualify for this option you will typically need to:

• Have been an active member of the health fund for at least 12 consecutive months
• Have all your premium payments up to date
• If going overseas, you will also need to apply for a suspension before you leave.

Which health funds let you suspend health insurance cover?

Most Australian health funds let you suspend your cover, but the rules differ from fund to fund and some are more flexible than others. Finder makes it easy to compare health insurance from these funds for free.

The tax impacts of suspending health insurance

While suspending your health insurance policy can save you money on your premiums, there are other tax implications that you may face by not have adequate coverage, depending on your circumstances. The main ones you need to worry about are the Lifetime Health Cover Loading and the Medicare Levy Surcharge.

Lifetime Health Cover Loading

If you're 31 years or older, you can go without hospital cover for a total 1,094 days (around 3 years) without affecting your Lifetime Health Cover Loading. However, once you've used up 1,094 days without cover, the loading will kick in again, adding 2% to your future premiums for each year you're not covered. An approved suspension is not counted towards these 1,094 days, so suspending your cover does not use them up. Breaks in your cover without an approved suspension do count, unless you cancel to go overseas for at least one continuous year. Suspension terms and conditions vary from fund to fund, so check with yours.

Medicare Levy Surcharge

If you earn over $105,000 per year, you're probably required to pay the Medicare Levy Surcharge, an additional levy on your tax of between 1% and 1.5%. If you suspend your policy, you may have to pay the MLS in your tax return for that financial year.

Why would I want to suspend my health insurance policy?

People suspend their health insurance for many different reasons. Financial hardship is a major reason people do this. If you've lost your job or are battling debt problems and struggling to meet your premium payments, your health fund may agree to let you suspend your membership for a temporary period.

Another common reason for suspending a policy is overseas travel. Australian private health funds are unable to provide any cover for medical expenses you incur overseas – you’ll need overseas travel insurance for that sort of protection – so if you’re going to be out of the country for a couple of months or more, suspending cover makes good financial sense.

Why not just cancel my policy?

When your health fund agrees to allow you to suspend your membership for a temporary period, you will not have to re-serve any waiting periods when you resume cover at a later date. You will also be able to maintain the level of cover that suits your needs and keep the current benefit limits that apply to your policy.

But if you decide to cancel your health insurance and then take out a new policy sometime in the future, you will have to serve the full waiting periods set by the fund before you can claim any benefits. This could have a serious impact on your ability to access the health care you need, especially if you develop any health problems which will then be classed as pre-existing conditions by your new fund.

Frequently asked questions

• How do I suspend my health insurance cover?

  It's usually easy to temporarily suspend your health fund membership. If you're suspending due to financial hardship, get in touch with your health fund. Once the suspension ends, you'll need to start making premium payments again within 30 days. If you're suspending cover while you travel overseas, make sure your travel dates are locked when you contact your health fund. Your suspension must be approved before you depart, as you can't apply for a backdated suspension.

• Am I covered while my policy is suspended?

  No, you will not receive any cover for health care expenses you incur while your policy is suspended. This means that you will not be able to make any hospital or extras claims. Of course, you will also not be required to pay any premiums during this time. However, despite the fact that no cover is provided, you are still considered to be a member of the fund during this time. As a result, you will be able to easily resume cover when the suspension period ends.

• How do I restart my policy?

  You'll need to restart cover within 30 days of the end of the suspension date, otherwise your policy could be cancelled. Your fund will probably remind you when cover is due to be resumed or will automatically reinstate cover at your requested date. If you've been overseas with an unconfirmed return date, inform the health fund that you are back in Australia within 30 days of your return (you will usually need to provide a passport, flight ticket or boarding pass as proof). If you are no longer experiencing financial hardship and can afford to resume cover, you can let your health fund know at any time. Once you've restarted your policy, your level of cover, benefits and waiting periods will all be the same as they were before the suspension.

• What if my fund won't suspend my cover?

  The rules for suspending your membership vary from one health fund to the next. So if your fund refuses to let you suspend your policy, contact other funds to find out whether they would be willing to grant a suspension. If suspending your membership is not an option, remember that you may be able to let cover lapse for a limited period – remember, you're allowed a combined total of 1,094 days without any cover without it having any effect on your LHC loading.

• Does my fund need to approve my health cover suspension?

  You will need to get permission from your fund to suspend cover, so you'll need to have an acceptable reason to ask for this option. Financial hardship and overseas travel are the two most common reasons for taking a break from cover, but your health fund may also allow a suspension in other specific circumstances.

• Is there a limit to how many times I can suspend my cover?

  There may be a limit on how many times you can suspend your health insurance in a calendar year. The most common limits are once or twice per year. Check with your health fund to find out if there are any other special conditions you need to meet.

Written by

Tim Bennett

Insurance expert

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A seasoned journalist with over 10 years of experience in news, politics and finance reporting, Tim has previously held roles at the ABC, SBS and Fairfax Media. Tim’s expert insights have been quoted in The Australian, The Daily Telegraph, The Courier Mail and more. He regularly appears on TV and radio, and has been interviewed on 7 News, Sunrise, SBS News, ABC Local, 3AW and 5AA. Tim is passionate about simplifying complex insurance topics for Australian consumers. He holds a Bachelor of Arts (Politics) from Macquarie University and a Tier 1 General Insurance (General Advice) certification, which meets the requirements of ASIC Regulatory Guide 146 (RG146). If you’re interested in a media interview with Tim, please reach out to our PR team at aupr@finder.com. See full bio

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