When a health insurance renewal notice arrives with another premium increase, it raises an understandable concern: the policy may be affordable today, but will it remain affordable in five or ten years?
In New Zealand, private health insurance can complement the public health system by helping fund eligible specialist consultations, diagnostic procedures, surgery and private treatment. Premiums are unlikely to remain unchanged indefinitely, so a useful review should consider both current value and long-term affordability.
Why do premiums increase?
Several factors may affect health insurance premiums, including age, medical inflation, new diagnostic and treatment technologies, claims experience and the benefits included in the policy.
An increase does not automatically mean a policy offers poor value. The more important question is whether the cover continues to protect against medical costs that would be difficult to fund personally.
Avoid cancelling without understanding the consequences
Cancelling provides an immediate saving, but obtaining cover again may not be straightforward. A future application could be affected by changes in age or health. New underwriting may result in exclusions, different terms, higher premiums or reduced cover for pre-existing conditions.
Before cancelling or changing insurers, it is important to understand the terms already secured under the existing policy.
Options worth reviewing
1. Separate core protection from optional benefits
Hospital, surgical and specialist cover may protect against larger expenses, while some everyday healthcare costs may be more manageable from household cash flow. Where the budget is limited, identifying the benefits that protect against the most significant financial risks can help establish priorities.
2. Review the excess
A higher excess may reduce the premium, but it increases the amount payable when making a claim. This option is generally more sustainable when sufficient emergency savings are available.
3. Consider future affordability
A policy should not be assessed solely on this year’s premium. Allowing for possible increases and maintaining a budget buffer can provide a clearer picture of whether the arrangement is sustainable.
4. Compare policy terms, not only price
Lower-cost policies may differ in their eligible procedures, treatment limits, non-Pharmac drug benefits, exclusions and claims conditions. A meaningful comparison should consider both cost and coverage.
5. Review regularly without changing unnecessarily
Income, health, dependants and financial responsibilities change over time. A periodic review may identify unnecessary benefits or gaps in cover. However, frequent switching can also introduce new underwriting risks.
Aim for sustainable protection
The objective is not necessarily to obtain the most extensive policy or the lowest premium. It is to maintain useful protection against costs that would be difficult to absorb, at a level that remains manageable over time.
One Step Finance can help clients understand their current health insurance, review available options and consider the possible consequences of making changes.
This article provides general information only and is not personalised financial or insurance advice. Cover is subject to insurer terms, eligibility and underwriting.