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Is health insurance worth it?

19 June 2014
Reading time: 7 minutes

Posted by Tom Hartmann , 11 Comments

Our friends Kerry and Ian are fans of health insurance, having cottoned on to it when Kerry worked at NZ Post and it was offered to employees.

‘I was a great advocate for it 20 years ago,’ she explains. ‘You don’t have to wait for public services, and you can select who you want to see if you’ve got a preference for a specialist or a surgeon. The waiting lists are so long, so if you are able to afford it, you are able to have surgery done right away.’

At the latest count, 1.34 million New Zealanders have opted for health insurance – close to 30% of the country according to the Health Funds Association. But how do you decide whether it’s worth it for you and your family to pay those premiums, when there is the public health system and ACC?

These days Kerry and Ian could certainly use the extra health insurance cover, after he recently damaged his shoulder on his construction job and she fractured her leg playing netball last Saturday. Perhaps they could get surgery earlier and be back at work that much sooner. Yet unfortunately, after having it for a dozen years or so, they let their health insurance go.

The issue? As with so many things, it was the cost. ‘We used to have it but had to get rid of it,’ she says, explaining how their health insurance premiums had jumped $400 a year. Yet now that they are out of work, they are having to go without close to $500 less a week in income.

Sometimes it seems like the more you need something, the more out of reach it gets.

What risks are you running?

When you’re weighing up whether you need any kind of insurance, you need to ask yourself what could happen that you might need to protect yourself and your family from. Will you need funds for major health costs, like surgery, or day-to-day things like doctor and dentist visits as well?

When it comes to your health, thankfully there are safety nets already in place: the public health system, and ACC for accidents. If you need acute surgery immediately, for example, that’s always going to be taken care of through the public health system.

But for ‘elective’ procedures, which are those that can be put off at least a week and are not as urgent, that’s where having health insurance can make a huge difference.

Simply put, money to pay for any health needs that arise will need to come from one of these three:

Should you self-insure?

Self-insuring means that, instead of paying an insurance company, you put money aside yourself for health costs. You opt to let the public health system cover urgent conditions, and if you need other surgery or treatments, you’ll cover them out of your own pocket.

To do this, you could expand your emergency fund – building it up so you could handle some of your healthcare costs if needed. Here at Sorted we typically recommend setting aside three months’ of expenses for an emergency fund, but you could set your goal even higher if you wanted to be prepared for healthcare costs, too.

For most, however, self-insuring may only be an option for cheaper procedures or treatments. Fairly common surgeries can cost in the order of $20,000 and over, so self-insuring is not going to be a complete alternative to insurance. 

That being said, setting aside a buffer for health costs can save you money on health insurance, allowing you to opt for a higher excess (the part of a claim that you pay before the insurance kicks in). Insurance companies reduce your premiums if you have a higher excess­­ ­­– you pay up to a certain point; they cover any costs above that.

Fast-tracking your health

The advantage of health insurance – although you may end up with exactly the same surgeon as you would in the public system – often lies in cutting down the wait times involved. While the public system will treat you right away for anything life threatening or for serious injuries from an accident, you’ll usually end up on a waitlist if it’s not as urgent.

How much of a wait are we talking about? One industry study found that it took on average 100 days longer for surgery if you were on the public list rather than on a private one. In the public system, the average time from the first GP referral to having surgery was 224 days; those going private would generally be seen by a surgeon a couple of weeks after the first visit.

‘The surgery was done, you’d recovered and you’re back at work before the public list would even see you,’ says Andrea McKay of the Health Funds Association.

That wait time, of course, also affects work and family. According to the study, people took an average of five weeks off work while they were waiting and required help from family members, who also had to take time off of work.

‘It’s peace of mind for you to know you can get treated when you want to, where you want to, if it’s ever going to come to that,’ says McKay. ‘And you’re not going to be waiting around in pain.’

How to save on health insurance

If you think that buying health insurance is the right thing for you and it fits your money plan, there are a number of ways to contain your costs.

Shop around and uncover the discounts. By carefully comparing what the insurance companies are offering and getting quotes, you could save hundreds or even thousands of dollars over time. The way you pay your premiums – such as by direct debit or annual lump sums – may also reduce your costs.

Live well and save. There are a number of discounts available for those with healthier lifestyles, such as for those who don’t smoke or drink too much, exercise and eat their fruit and veg.

Take advantage of group rates. If your employer offers health insurance, for example, a ‘comprehensive’ policy that covers everyday medical costs may be worth it. These workplace-based policies are also cheaper because their cost to you is not typically based on your age, but rather where you work, and employers are often able to negotiate much better group rates because of the strength in numbers.

Getting in early is also key – at a younger age, health insurance premiums are much cheaper. New packages from insurers aimed at twentysomethings, for example, can start at $1 a day or even as low as $4.95 a week. While these may not cover surgery, you can claim for everyday things like visits to your GP, dentist, physiotherapy and glasses. And because insurance does not usually cover for ‘pre-existing conditions’, starting early solves that, too.

You can also reduce the amount of coverage you buy, such as by choosing a higher excess or a lower coverage of say $100,000 instead of $300,000. (According to Southern Cross, there is no single private procedure in New Zealand that would cost as much as $200,000 – almost all last year were below $100,000.) If you choose a higher excess, you’ll need your emergency funds available at short notice just in case.

By focusing on the big risks – skipping comprehensive coverage for day-to-day medical costs and choosing ‘hospital-only’ or ‘hospital and specialist’ policies – you’ll ensure you’re protected from the highest health costs that might hit.

And all the while saving on premiums along the way. 

Comments (11)


  • Gravatar for

    22 September 22

    We have been declined for every claim. It is all nonsense and a waste of time. This included dentist and physio. My husband needed a neurologist- it was the same dr as the public system and when we called the private they recommended the public system because wait times were the same but public actually offered more help. Don’t use AA.

  • Gravatar for Larry Raines

    28 May 21
    Larry Raines

    Before reading your article, I was not interested in health insurance. After reading your article, I also got some suggestion for discount. I think it will be helpful to me.

  • Gravatar for Tim Neal

    19 January 21
    Tim Neal

    private health cover is only affordable if you don't need it.
    As soon as you start to have life defining health issues EG Arthritis the rates suddenly go up.
    I had a surgical issue due to art and had to wait 2 months for a surgery, my employer had a private scheme and the surgery date I was offered was the day before the public one.
    Same surgeon and team, I went private as I thought it would be better. First thing you do is sign a form to say if there's a medical emergency during the surgery that I will be transferred to the public system.

    This was No7 or 8 surgeries Ive now had, and the only one in private and to be honest other than the private room no better, or worse. So would I pay 1000s for it? No.
    I find the service provided by my tax dollar just as good. Same people, just different location and honestly if I have a medical emergency whilst on the table I'd rather be in the same building and not have be transferred 1/2 way across town.

  • Gravatar for sana

    12 November 20

    The comment is good, there are some people in the world who do something. But the one who walks with everyone is a good person, really your post is very good and very unique thanx

  • Gravatar for Kaye D

    10 July 20
    Kaye D

    I got health insurance when I was 30 through work. It covered my husband and I for pre existing conditions because of the group discount from my workplace. I had 3 children shortly after and they were covered as well. My children had various issues and the policy was a-god send. Allergies from day care and scoliosis. Now that we are 50 after 20 years of paying in, my husband and I have various medical issues, nothing catastrophic, but enough to be thankful that we can have procedures done quickly to fit in with work commitments.

  • Gravatar for Godfrey Geismar

    10 July 20
    Godfrey Geismar

    I agree with the previous comments. I had health insurance for 30 years, was very healthy and never claimed a thing. As soon as I turned 60, the premiums were hugely increased. I increased the excess to $2000, but when I got to 65 the premiums increased enormously again. I cancelled on the spot. It was all a total waste of money for me and I strongly advised each of my 5 children not to bother with health insurance in NZ. I have needed minor hospital treatment since and was treated promptly and with great care.

  • Gravatar for Susan Murray

    23 June 20
    Susan Murray

    We are with AIA and they have been increasing our premium every year by 20% -25% for the past 16 years and now turning 61 years of age they have increased it for this year by 50%!! to $8900!!
    We feel they are doing this to bump us off as we become a liability now we are older. Its nothing short of bullying and blackmail.

  • Gravatar for

    25 February 20

    Insurance premiums jump dramatically as we age. We have been retired for 8 years (now 73 and 74) and at that time gave up insurance because of those huge increases. Last year my husband was diagnosed with cancer and once we got into the public health system it was amazing. No costs spared. Giving up the insurance was a good decision at this stage of our lives.

  • Gravatar for Adam Paul

    17 January 20
    Adam Paul

    The New Zealand health system is actually not that bad, the only real time we've used the insurance has been for elective surgery, any kind of an emergency and you can be reasonably confident of being looked after in the public sector.

  • Gravatar for Gerry

    18 April 19

    We are both now in the 70's and our account this year is $11,000 a 25% increase included, Our excess is $2000. This Hospital /Surgery. We are struggling to accept this cost., even though we can afford it . The Invoice gives now detail just a sum ???

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