Is High Excess Private Health Insurance Worth It in Australia?

A high excess private health insurance policy in Australia can save you hundreds of dollars annually in premiums, but it means paying more upfront when you make a claim. Whether this trade-off suits you depends on your health, savings, hospital use patterns, and risk tolerance. Generally, healthy people who rarely claim benefit most from high excesses, while those with ongoing conditions or planned procedures typically save more with lower excesses despite higher premiums.

Understanding Excess in Australian Private Health Insurance

The excess (sometimes called a deductible in other countries) is the amount you pay out of pocket each time you’re admitted to hospital as a private patient before your health fund pays its share. In Australia, private hospital insurance excesses typically range from A$0 to A$750 per person per year, though some funds offer excesses up to A$1,000 for maximum premium savings.

Your excess applies per admission, not per year, though most funds cap the total annual excess at a set number of admissions (commonly two to three per person). Once you’ve met that annual cap, subsequent admissions in the same calendar year are typically excess-free (APRA, 2026).

The excess does not apply to same-day procedures, psychiatric admissions, or rehabilitation, depending on your fund’s specific terms. Always check your Product Disclosure Statement (PDS) to understand exactly when your excess applies.

High Excess vs Low Excess: Premium Savings Comparison

Feature	High Excess (A$500-$750)	Low Excess (A$0-$250)
Annual Premium	A$1,800-$2,400 (single hospital cover, indicative)	A$2,400-$3,200 (single hospital cover, indicative)
Annual Savings	A$500-$800 lower premium	Baseline
Cost Per Admission	A$500-$750 paid upfront	A$0-$250 paid upfront
Best For	Healthy individuals, low hospital use, strong emergency savings	Frequent hospital users, planned procedures, limited savings buffer
Break-Even Point	One admission or fewer per year	Two or more admissions per year

As of October 2026, these figures are indicative and vary by fund, cover level, age, and location. Verify current premiums and excess options in your fund’s PDS and through the government’s privatehealth.gov.au comparison tool.

High Excess Policies: Who They Suit

High excess policies work best for people who:

Rarely use hospital services. If you’ve had no hospital admissions in the past three to five years and have no planned procedures, the annual premium savings outweigh the excess you’re unlikely to pay. For a healthy 35-year-old with a A$750 excess saving A$600 annually on premiums, you come out ahead unless you’re admitted more than once per year.

Maintain strong emergency savings. You need enough liquid savings to cover the excess immediately without financial stress. As a general rule covered in foundational texts such as Principles of Finance, you should have three to six months of living expenses saved before opting for high-excess insurance products. If a A$750 bill would create hardship, a lower excess provides more certainty.

Value lower ongoing costs. Some people prefer to self-insure for smaller, predictable expenses and pay lower premiums month to month. If you’re disciplined about setting aside the premium savings in a dedicated health fund, a high excess policy can build your financial resilience over time.

Hold cover primarily to avoid the Medicare Levy Surcharge. Higher earners (single income over A$97,000 or family income over A$194,000 for 2026-27) who hold hospital cover mainly to avoid the 1% to 1.5% surcharge may rarely claim. A high excess policy meets the surcharge avoidance requirement at the lowest cost (ASIC MoneySmart, 2026).

Low Excess Policies: Who They Suit

Low or nil excess policies suit people who:

Use hospital services regularly. If you have a chronic condition requiring periodic admissions, joint replacements planned, or maternity cover you’re about to use, paying two or three excesses per year quickly erodes the premium savings from a high excess policy. Someone admitted twice annually with a A$750 excess pays A$1,500 out of pocket, wiping out the A$600 premium saving and leaving them A$900 worse off.

Have limited savings. If an unexpected A$500 to A$750 bill would strain your budget or require credit card debt, the certainty of a low excess provides peace of mind. The higher premium is a predictable monthly cost you can budget for.

Plan elective surgery soon. If you’re past your waiting periods and have a planned knee reconstruction, hernia repair, or similar procedure, choosing a low excess before the admission saves money compared to paying a high excess for a single known event.

Prefer cost certainty. Some people value knowing exactly what they’ll pay each month over variable out-of-pocket costs. A nil excess policy means you pay nothing when admitted, making budgeting simpler.

Beyond the Excess: Other Out-of-Pocket Costs

The excess is only one component of your total out-of-pocket costs under private health insurance in Australia. Even with a nil excess policy, you may still pay:

Gap payments. When your doctor or hospital charges more than the Medicare Benefits Schedule (MBS) fee or your fund’s agreed rate, you pay the difference out of pocket. Gap cover arrangements vary by fund and provider, but gaps can range from a few hundred to several thousand dollars for specialist procedures. The excess does not cover or reduce gap payments.

Exclusions and restrictions. If your policy excludes certain treatments (such as pregnancy, joint replacements, or heart procedures) or applies a restriction (paying only a portion of the costs), you’re responsible for the full gap or the excluded amount. Always check your level of hospital cover in the PDS.

Non-covered items. Private health insurance does not cover GP visits, out-of-hospital specialist consultations, or most pharmaceuticals. These remain your responsibility or are covered by Medicare.

Accommodation upgrades. If you choose a private room when your policy covers only shared accommodation, you pay the difference.

Understanding these additional costs is critical when evaluating whether a high or low excess policy represents better value. A low excess saves you money on admission but does nothing to reduce gap payments or exclusions (AFCA, 2026).

How to Decide Which Excess Level Suits You

Follow these steps to choose the right excess for your situation:

Review your hospital use history. Count how many times you’ve been admitted to hospital in the past three years. If the answer is zero or one, a high excess likely saves you money. If it’s two or more per year, a low excess is typically cheaper overall.

Assess your savings buffer. Can you comfortably pay the high excess amount from savings without stress? If not, opt for a lower excess. The slightly higher premium is worth the certainty.

Factor in planned procedures. If you know you’ll use your cover in the next 12 months (such as for a planned surgery after waiting periods), calculate the total cost including excess. Often, switching to a lower excess temporarily before the procedure saves money.

Compare actual quotes. Use privatehealth.gov.au or your fund’s website to get quotes for the same level of cover with different excess options. Calculate the premium difference annually and compare it to the excess you’d pay based on your expected hospital use.

Read the PDS. Confirm when the excess applies (per admission, annual cap, same-day exclusions) and ensure you understand any other out-of-pocket costs such as gap payments and exclusions. The Target Market Determination (TMD) will also indicate who the product is designed for.

Consult a licensed insurance adviser. If your health situation is complex or you’re unsure, a licensed adviser can review your needs, compare policies, and recommend an excess level that balances cost and coverage for your circumstances.

Common Mistakes When Choosing an Excess

Choosing high excess without savings. Opting for a high excess to save on premiums backfires if you can’t afford to pay the excess when admitted. You may delay necessary treatment or face financial stress.

Ignoring frequency of use. People often overestimate their ability to avoid hospital admissions. Age, chronic conditions, and life changes (such as pregnancy) increase your likelihood of claiming. Review your excess choice annually.

Focusing only on the excess. The excess is just one cost. A policy with a low excess but significant exclusions, restrictions, or high gap payments may cost you more overall than a high excess policy with comprehensive cover and strong gap arrangements.

Not updating as circumstances change. Your ideal excess level shifts as your health, savings, and life stage change. Reassess your excess at renewal, especially after major life events such as diagnosis of a condition, planned surgery, or significant income changes.

Frequently Asked Questions

Can I change my excess level after I’ve bought the policy?

Yes, most funds allow you to change your excess at any time, but the change usually takes effect at your next renewal date or after a waiting period. Increasing your excess to lower premiums is typically immediate, while decreasing your excess may require waiting periods to prevent adverse selection.

Does the excess apply to extras cover?

No. The excess applies only to hospital cover. Extras cover (dental, optical, physio) operates on annual limits and percentage rebates, not excesses.

Is the excess tax deductible?

No. Private health insurance premiums and excesses are not tax deductible for individuals in Australia. You do receive the private health insurance rebate based on your income and age, which reduces your premiums, but the excess itself is a personal out-of-pocket cost.

Do I pay the excess for same-day procedures?

Most funds waive the excess for same-day procedures (such as endoscopy, cataract surgery, or minor operations where you’re not admitted overnight), but policies vary. Check your PDS to confirm.

What if I can’t afford to pay the excess when admitted?

Contact your health fund immediately. Some funds offer payment plans or hardship arrangements. You may also be able to opt for treatment as a public patient through Medicare instead, though this may involve longer waiting times and less choice of doctor.

Conclusion

Choosing between high and low excess private health insurance in Australia comes down to balancing premium savings against out-of-pocket risk. High excess policies suit healthy individuals with strong savings who rarely claim, while low excess policies provide certainty for frequent users or those with limited financial buffers. Calculate your expected hospital use, assess your savings, and compare actual quotes for the same cover with different excess levels. Always read the Product Disclosure Statement and Target Market Determination, and consider consulting a licensed insurance adviser to confirm your choice suits your personal health and financial situation. Remember that the excess is only one component of your total costs, and gap payments, exclusions, and other out-of-pocket expenses also affect your overall value.

General Advice Warning: This article provides general information only and does not take into account your objectives, financial situation, or needs. Before acting on this information, consider whether it is appropriate for you. Read the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) from your health fund, and consider obtaining personal advice from a licensed insurance adviser or financial adviser. Private health insurance policies vary significantly by fund, cover level, and individual circumstances. Always verify current premiums, excess options, waiting periods, exclusions, and gap cover arrangements directly with your fund or through the government’s privatehealth.gov.au comparison service before making a decision.