Cut Costs, Not Coverage: 5 Essentials About Affordable Health Insurance
Published October 11, 2025
It is a vital thing to decide to cover yourself by purchasing private health insurance, but choosing a perfect policy can be daunting enough. With seemingly infinite choices to cut through, it is hard to know precisely which kind of policy will suit your circumstances. With the increasing cost of living here in Australia, you may be tempted to take affordable health insurance out there, but is cheap health insurance worth it in the long run? Let’s discuss some of the reasons why cheap health insurance should be avoided, as well as if cheap health insurance is worth it at all in some cases.
1. Cheap health insurance = Minimal cover
One of the largest traps of affordable health insurance is that there is little or no coverage for critical services. Cheap policies will only cover you for the absolute essentials, so that’s just urgent hospital care and ruling out other major health priorities such as dental, optical, physiotherapy and mental health services.
Though you might feel like you’re pocketing the savings, hidden out-of-pocket expenses will leave you by surprise and take a significant bite out of your hip pocket. Suppose you have a root canal or are in need of constant physio, if your policy does not include such services, you’ll be paying much more in the long term.
2. You could end up paying more out-of-pocket
Without actually reading the PDS in very close detail, you could overlook some of the sneakier costs of cheap health insurance. Specifically, you’ll be hit with higher out-of-pocket expenses than with more detailed cover. Policies that make their low premiums the hook to lure people in tend to come with larger gap fees, which translates to when you do take advantage of your health insurance you’ll have to pay a significant share of the eventual bill yourself.
3. Fewer choices for hospitals and substandard care
With affordable health coverage, you’ll likely only have a limited choice of hospitals and healthcare providers you can select. Affordable plans tend to have a small network of in-network providers, limiting your options for doctors and healthcare facilities. In certain situations, you may have to travel far from home just to get treatment – or worse, accept a provider that makes you somewhat uneasy.
4. Caps that are severely limited on treatments and services
Another worst aspect of affordable health insurance is that it typically implies tight restrictions or limits on the sum you can claim on certain procedures. These restrictions limit how much your insurance company will reimburse for various treatments, and after you go above that restriction, you’re on the hook for the rest. Some are annual caps, but there are also lifetime caps – once you’ve passed the threshold, you’ll never be able to claim anything back on that procedure again.
5. Risk of higher premiums in the long run
Although affordable health insurance may be a good cost-saving option at present, it may cost you more in the future. In Australia, if you don’t purchase private health insurance by age 31, you’ll be subject to LHC loading a penalty that adds an additional 2% to your premiums for each year past 30 that you go without it. The penalty rides on top of your regular premiums and is applied for 10 years.
To summarise
When making the decision whether or not to pay for cheap health insurance, be sure you consider your personal health requirements, lifestyle, household size and long-term financial aspirations.
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