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

Ethical Investing for Australians

I write about investing, because it's a key part of life. Spending less and investing means an automatic income. An automatic income means we can work less (if we choose) and definitely stress less. But where to invest? What to invest in? Many people expect their money to be invested responsibly and ethically - rather than making money through things like cigarettes, weapons, casinos, adult entertainment, environmental destruction, and pollution from fossil fuels. Those are all things we could probably do with less of. So how do we invest to get good returns - and to have a positive effect on the world? Here are some sources I've seen: Ethical Investing in Australia At Frugality and Freedom , Michelle has done a fair bit of research into Ethical Investing in Australia . For herself, she's chosen Bank Australia for banking, Australian Ethical for superannuation, and two exchange-traded funds ( FAIR and ETHI ) for her share investing outside of super. She also gives detail...

How to waste a year's wages

A friend recently asked me why it is that so many people (on good incomes) are struggling to save. Often the big three money areas are housing, transport and food. In one sense these are necessary items. But what we spend on them is often way more than necessary. I crunched some numbers on how much extra my wife and I could spend on these things - if for some reason we wanted to burn our money. 1. Housing Our apartment is fairly nice, but also cost-effective. I've mentioned how choosing it saves us $1,800 per year , compared to a similar one we saw. The high end of 2-bedroom apartments in our suburb is $305 per week more than our apartment. Not $305 per week. $305 per week more than ours is. I cannot get over that. Sure it's new and modern-looking, but that's a lot of money. It's an extra $15,860 per year above what we pay. 2. Transport The Australian Automobile Association lists the costs of owning and running a car. It includes many often-overlooked c...

Don't dump on charities

Netflix causes mass dumping. Here's an alternative. January is usually a big month for physical donations to charity. In 2019 it's been over-the-top (literally) as charity donation bins have been overflowing with items. The Netflix series "Tidying Up" by famous declutterer Marie Kondo (see her book ) has inspired many to declutter their homes. But in the process they've cluttered the streets. What's so bad about donating? When the bins overflow the extra items are thrown away. Having been in the weather, the rain and on the ground, they are classified as contaminated and cannot be sold. To make it worse, much of what fills the bins is not good enough to sell, and is also dumped. Bad donations hurt charities 13 million dollars. That's how much it costs charities to deal with all the junk we dump on them - 60,000 tonnes a year. Lifeline says half its stores have stopped accepting donations. We might think we're helping, but that's a lot ...

But wait... there's less!

Search This Blog