Is private health insurance a waste of money?

Buying things we don't need. It makes us poorer, so we have to work more just to break even. Often we'd be better off not buying.

The biggest household expense, other than our house, is health / medical costs.

Is private health insurance worth it?

Finance expert Scott Pape (The Barefoot Investor) says in many cases the answer is no. He reckons if you're under 31, or earn under $90,000 ($180,000 for couples) you're probably better off without it.

Why? Australia has "one of the best public health systems on the planet" that's already paid for; so you may as well use that. (Note: This may be a different story in the USA and other countries). The exception is if you're over 30 and a high income earner.

What's wage got to do with it?

Health insurance is one product the government punishes you for not buying. If you're a high income earner you'll be taxed more if you don't buy some. If you decide to buy some later in life (later than 30) then you'll pay an extra fee on top of normal premiums - whatever your income.

Despite all these punitive measures, it still may not be worth it. Try this interactive calculator to see the pros and cons for your situation.

From an advertising perspective

ABC's comedy/advertising show Gruen did a health episode. Most of the chat was about the psychology of how companies advertise - particularly to young people who generally don't need the product. "In the past year 250,000 people have ditched health insurance. The majority of them are under 34", states host Wil Anderson.

Todd Sampson on Gruen discussing private health insurance

"They can do math and they've worked it out", explains panelist Todd Sampson. The insurance companies "don't want you to use too much. They work off the 30% rule. So if you pay $1000 for your fee you get roughly $300 back a year - and $700 goes straight to profit."

PS. Make up your own mind about your situation, but do think about whether you need it and what the reasons are. According to stats, it's the second biggest single cost after housing. You may also want to see my post on how to save on housing.

Comments

What to do with 128 pens?

I never need buy a pen again. Ever. The pen round-up. I searched the house for pens and gathered them up. We had 128. Woah - that's more than I expected. Then it was test-time. (You can get a lot done watching summer sport ;). Good ones went on the table. Broken ones in the box. Pen operations I saved a few 'broken' pens, by taking working insides and matching them with functional outsides. Particularly much-loved pens, for sentimental reasons, were given a life-extending 'ink transplant'. Final Tally We ended up with 67 broken pens and 61 good ones. And about 10 pencils. What to do with 67 broken pens? In my city Biome recycles pens . It's as easy as taking them into the store and dropping them into the giant collection box. Decluttering and recycling together - I love it. A lifetime of pens An average pen writes 45,000 words. So that dedicated shopping list pen on the fridge could write a 20-word shopping list for 43 years. Our 61 pens repre...

How to never worry about the share market

The Ulysses Contract doesn't sound like a book about investing. The subtitle "How to never worry about the share market again" is what grabbed my attention. The book is mostly about the mindset and strategy of investing in shares. The obscure title refers to Greek mythology, the temptation of the siren songs, and the measures Ulysses took to keep his ship and crew safe - including being tied to the mast of the ship, to hold himself to his own plan. In the book, Michael Kemp outlines the temptations (siren songs) in the share market, gives some solid guiding principles (the mast) that investors can secure themselves to, and outlines his idea of a Ulysses contract for investing. The temptations include spending too much on consumer items (it's hard to invest if we spend all our income) doing what everyone else is doing (when the crowd is selling, it might be the best time to buy) expert predictions (not worth that much, and can be wrong as much as right) market-timing, ...

Four Thousand Weeks - Time and How to Use It

First question. Why 4000 weeks? That's the average human lifespan. If you're reading this you've probably used up 1000 already. If you're a bit older you may have only 2000 left. Maybe just 1000. That can be a startling thought - given how quickly each week goes by. There's so much wisdom in this book, it's hard to summarise it briefly. But I'll give it a go.... Face the Finitude If time was infinite, we could work for 40 years and not miss out on anything. We could spend frivolously as we could always earn more money later. But in the real world there are time limits. Even if we have enough money to escape the nine-to-five, our time (though more plentiful) is finite. Just like money, we will run out if we fritter it away on low-value options. "Face the Finitude" has become one of my internal phrases now. It's my reminder that I don't have infinite time to waste. It may be helpful to think of it like money. eg. I might like something, but d...

But wait... there's less!

Search This Blog