How to buy health insurance

It’s easy to buy the wrong kind of insurance, fail to grasp limits on your cover, and even do things that legally entitle your insurer to tear up the policy. Here are 10 things to consider:

1 Understand the big risks: You may like claiming for GP visits, but before you buy a cheap policy with extremely limited surgery and hospital cover (or none) consider what you would do if you got hit with a $8000 bill for knee surgery. At its most basic, insurance is there to cover the things you cannot.

2 Understand what’s not covered: Fake peace of mind is no good. You need to understand what your health insurance does not cover, as much as what it does. The list of things not covered can be lengthy, and often includes self-inflicted damage from things like suicide attempts and drug use.

HIV and AIDs conditions may be excluded, as are mental ones. It’s also not for cosmetic, or “prophylactic” treatments. Angelina Jolie’s double mastectomy removed the high risk of her contracting breast cancer but wouldn’t be covered by policies here.

3 Don’t lie: Insurers can decline claims and cancel policies if they catch you lying in the application or a claim. For example, if you said you were a non-smoker but then relapsed and neglected to tell them.

4 Duty of disclosure: When applying for insurance, people have a legal duty to disclose everything they knew (or ought to have known) which would have influenced the decision of a prudent insurer when deciding whether to give them cover.

As Nib explains, that can include: “Any medical condition or any sign, symptom, treatment or surgery of any medical condition applicants have had or have when taking out the policy. Be prepared to fight your case if things turn nasty when you claim.

5 Accept blanket exclusions: In a recent example, a parent added an infant son onto their health insurance policy. The infant has had a “cough” so the insurer proposed excluding any claim related to the boy’s chest . . . forever. That’s patently ridiculous.

The parent complained and the insurer dropped its stance. Brokers often push back on such attempts and so should people buying direct.

6 Switch for lower premiums: Some people seeking lower premiums shift insurer. That’s fine but if you have existing conditions, even ones you are unaware of, they are unlikely to be covered. For many people, picking a health insurer is a bit like getting divorced. By the time you think about leaving, it’s hard to do so.

7 Type of insurer: There are two types in New Zealand, shareholder-owned companies like Nib and Sovereign, and member-owned organisations like Southern Cross and Medical Benefits Society. To return profits to shareholders, shareholder-owned companies have to be much more efficient, pay out a lower proportion of premiums on claims, or do a mixture of both.

8 Mind the gaps: With most policies you’ll still need access to emergency cash. Often you’re up for 20 per cent to 40 per cent of the cost of procedures.

Also, be aware, not all the surgeons you are sent to charge the same, and that can mean a significant jump in what you have to pay yourself above your insurer’s maximum payout.

9 Constantly review: As you age, your needs change. Buying an ultra-cheap basic policy might not be too much of a risk in your 20s. In your 40s, the risk rises dramatically. As Nib says: “We recommend you review your health insurance at least once each year.”

1 0 Leaving it too late: The longer you leave it to take out cover, the more pre-existing conditions you are likely to have developed.