Many young Aussies in their 20s wonder if private health insurance is worth it. This guide breaks down hospital cover vs extras cover, with real-life scenarios for students and job starters to help you make the smartest choice for your budget and lifestyle.
Navigating health insurance options can feel overwhelming when you’re just starting out. Between university expenses, entry-level salaries, and figuring out adult life, adding another monthly expense might seem unnecessary. However, understanding your options now could save you thousands later and ensure you’re covered when life throws unexpected health challenges your way.
Why Young Adults Think About Health Insurance Early – Context in Australia
Medicare provides excellent basic healthcare coverage for all Australians, including free treatment in public hospitals and subsidised GP visits. However, many young adults consider private health insurance for faster access to specialists, choice of doctor, and coverage for services Medicare doesn’t fully cover.
The biggest reason to consider private cover early is the Lifetime Health Cover (LHC) loading. If you don’t have hospital cover by July 1st following your 31st birthday, you’ll pay a 2% penalty for every year you delay, up to a maximum of 70%. For example, a 24-year-old job starter weighing their options has seven years to decide without facing penalties.
Quick pros and cons:
Pros: Avoid future penalties, shorter wait times, choice of specialist, private room options
Cons: Monthly premiums, waiting periods, gap payments, may duplicate Medicare coverage
Starting early also means serving waiting periods while you’re young and less likely to need major treatments, positioning you better for when you might actually need the coverage.
Understanding Hospital-Only Cover – What It Really Pays For
Hospital cover pays for treatment as a private patient in hospital, including accommodation, theatre fees, and medical services during your stay. This means shorter waiting lists for non-emergency procedures, choice of specialist, and often a private room with better amenities.
Waiting periods apply to most services – typically 2 months for accidents and 12 months for pre-existing conditions. Some exclusions might apply depending on your policy tier, such as pregnancy, joint replacements, or heart surgery on basic policies.
Example: Sarah, 26, needed her appendix removed. With her Bronze Plus hospital cover ($32/week), she chose her surgeon and had surgery within days rather than waiting weeks in the public system. Her total out-of-pocket cost was $500 in gap payments, compared to free public treatment but with longer wait times.
| Comparison | Public Hospital | Private with Hospital Cover |
|---|---|---|
| Cost | Free | Excess + gap payments ($200-$800) |
| Wait time | 2-4 weeks for non-urgent | Usually within days |
| Room | Shared ward | Often private room |
| Doctor choice | Assigned | Choose your specialist |
Hospital cover is particularly valuable if you have ongoing health conditions, play contact sports, or work in high-risk occupations where accidents are more likely.
What Extras Cover Actually Means – Common Services Covered
Extras cover helps pay for out-of-hospital services that Medicare doesn’t fully cover or excludes entirely. Think dental check-ups, new glasses, physiotherapy after a gym injury, or psychology sessions for mental health support.
Young adults commonly use dental services (cleaning, fillings), optical services (prescription glasses, contact lenses), and allied health services like physiotherapy, psychology, and dietetics. Coverage typically works on an annual limit basis – for example, up to $400 for dental or $300 for optical per year.
Example: Jake, a 23-year-old student, needed glasses ($350) and a dental cleaning with filling ($280). His basic extras cover ($18/week) provided 60% back on optical and 70% on dental, saving him $406 over the year – more than covering his annual premiums.
Common extras inclusions with typical rebate amounts:
- Dental: 60-80% back, $300-$600 annual limit
- Optical: 60-70% back, $200-$400 annual limit
- Physiotherapy: $40-60 per visit, $300-$500 annual limit
- Psychology: $80-120 per session, up to 10 sessions yearly
- Pharmacy: 60% back on PBS medications
The key is choosing extras that match your actual usage patterns. If you never go to the dentist or wear glasses, extras cover might not provide value.
Hospital vs Extras: Which Is Smarter in Your 20s?
The choice depends entirely on your lifestyle, health needs, and budget. Hospital cover protects against major unexpected costs but offers less day-to-day value. Extras cover provides regular benefits you’ll actually use but won’t help with serious medical emergencies.
Scenario 1 – University student (Emma, 21): Living on Austudy payments and casual work, Emma prioritises immediate healthcare needs. She chooses extras-only cover ($15/week) to help with dental visits and prescription glasses, skipping hospital cover until she graduates and starts earning more.
Scenario 2 – Graduate professional (Marcus, 25): Earning $65,000 yearly in his first corporate job, Marcus values both immediate benefits and future protection. He chooses combined hospital and extras cover ($45/week total) to maintain his dental health while avoiding future LHC penalties.
| Cover Type | Best For | Weekly Cost | Key Benefits |
|---|---|---|---|
| Extras only | Students, tight budgets | $12-$20 | Regular healthcare savings |
| Hospital only | Healthy adults, LHC concerns | $25-$40 | Major medical protection |
| Combined | Stable income, comprehensive needs | $40-$65 | Complete coverage |
Most financial experts suggest prioritising hospital cover if you can only afford one, as it protects against potentially devastating costs that extras cover cannot.
How Much Does Health Insurance for Young Adults Australia Cost?
According to privatehealth.gov.au data from 2024, young adults can expect to pay varying premiums depending on coverage level and location. Basic hospital cover averages $25-$35 weekly, while comprehensive extras run $15-$25 weekly.
Average monthly costs for young adults:
- Bronze hospital cover: $110-$140/month
- Basic extras cover: $60-$100/month
- Combined bronze + basic extras: $170-$240/month
- Silver hospital + comprehensive extras: $220-$320/month
Location significantly impacts costs – Sydney and Melbourne residents typically pay 10-15% more than regional areas. Your income also affects the government rebate, which can reduce premiums by up to 35% for lower earners.
Sample breakdown for a 24-year-old in Melbourne:
- Bronze Plus hospital: $128/month
- Basic extras: $78/month
- Government rebate (income under $90,000): -$65/month
- Net monthly cost: $141
Remember that these are base premiums – you’ll still face excess payments ($250-$750) and gap fees when actually using hospital services.
Tips to Save on Health Insurance in Your 20s
Smart young adults can significantly reduce their health insurance costs without sacrificing essential coverage. The government rebate alone can cut premiums by hundreds annually, and many insurers offer student discounts of 5-10%.
Avoid over-insuring by honestly assessing your needs. If you never need massage therapy or acupuncture, don’t pay for comprehensive extras that include these services. Similarly, if you’re healthy and active, basic hospital cover might suffice over gold-level policies designed for older adults with complex needs.
Example: Chloe, 27, reviewed her extras cover and realised she was paying for services she never used. By switching from comprehensive extras ($32/week) to basic dental and optical only ($18/week), she saved $728 annually while maintaining coverage for services she actually needed.
Money-saving checklist:
- Claim the government rebate (up to 35% discount) Look for student discounts if studying
- Choose annual payment over monthly (often 5-10% cheaper)
- Review and adjust coverage yearly
- Compare insurers annually – loyalty rarely pays
- Start with basic policies and upgrade as income grows
- Consider hospital-only cover if budget is tight
The key is finding the sweet spot between adequate protection and affordability. Your insurance needs will evolve as your income grows and life circumstances change.
Making the Right Choice for Your Situation
In your 20s, the “right” health insurance depends entirely on your lifestyle, income, and health priorities. Students on tight budgets might benefit most from extras-only cover for regular dental and optical needs, while young professionals with stable incomes should consider combined cover to avoid future penalties and gain comprehensive protection.
The most important step is to start comparing options now, even if you don’t purchase immediately. Understanding costs, coverage levels, and timing helps you make informed decisions that could save thousands in the long run. Use comparison tools, check for government rebates, and remember that avoiding the Lifetime Health Cover penalty alone makes early consideration worthwhile.
Ready to explore your options? Visit privatehealth.gov.au to compare policies from different insurers and find coverage that fits your budget and lifestyle. Your future self will thank you for planning ahead.
