Cash is tight for many Kiwi families, though here’s one expense you shouldn’t trim

Health insurance is an essential aspect of life that provides you with the financial security you need when it comes to your health. While it may seem like an unnecessary expense, cancelling your health insurance can be a costly mistake in the long run.

Before we dive into the reasons why you should never cancel health insurance, let's define what it is. Health insurance is a type of insurance that covers the cost of medical and surgical expenses incurred by the insured. It helps individuals pay for their healthcare expenses, including doctor visits, hospitalisations, surgeries, and prescription drugs, among others.

Now that we've defined health insurance let's discuss the reasons why you should never cancel it.

What About ACC?

In New Zealand, the Accident Compensation Corporation (ACC) provides no-fault injury cover for all residents and visitors. This means that if you are injured, regardless of how it happened, ACC will cover the cost of your medical treatment and any other support you may need to recover, such as physiotherapy and rehabilitation. This injury cover extends to injuries that happen at work, home, or during leisure activities.

While ACC provides well regarded injury cover, it's important to note it only covers injuries and not illnesses, or issues related to wear and tear. Private health insurance, on the other hand, covers a wide range of medical expenses, including elective surgeries, specialist consultations, and prescription medicines. Private health insurance also provides more choice and control over the medical care you receive, including the ability to choose your healthcare provider and the timing of your treatment.

Moreover, private health insurance in New Zealand offers the ability to avoid long waiting lists for elective procedures. Additionally, some private health insurance policies cover services and treatments that are not available in the public health system, such as acupuncture and osteopathy.

1. Health Insurance is Different

While cancelling your health insurance can have significant long-term consequences, the same is not always true for other types of personal insurance policies, such as life insurance. In fact, as you age, it may make sense to reduce or cancel certain personal insurance policies that are no longer necessary or cost-effective.

Life insurance, for example, is typically purchased to provide financial protection for your loved ones in the event of your death – particularly if you have young children and a mortgage to repay. As you age, your need for life insurance may decrease, especially if your children are grown and you’ve got little or no debt. Additionally, the cost of life insurance tends to increase as you age, which can make it less cost-effective over time.

Other types of personal insurance, such as income protection cover or disability insurance, may also become less necessary or cost-effective as you age, particularly if you have sufficient retirement savings or other sources of income to support yourself in the event of a disability or long-term care need.

However, health insurance, particularly private medical insurance, is one type of insurance that you may want to maintain throughout your life, regardless of your age. This is because healthcare costs tend to increase as you age, and having private medical insurance can provide access to higher quality care and more treatment options than relying solely on the public healthcare system.

Additionally, many private medical insurance policies offer additional benefits, such as wellness programmes and preventative care services, which can help you maintain your health and wellbeing as you age. Therefore, while it may make sense to cancel certain personal insurance policies as you age, health insurance is one type of insurance that you may want to consider maintaining for the long term.

2. Financial Protection

The most significant reason to have health insurance is financial protection. Medical expenses can be incredibly expensive and can lead to significant financial difficulties for those without insurance coverage. Without insurance, these costs can quickly add up and leave you in significant debt.

In New Zealand, some surgeries can cost many thousands of dollars, and without health insurance, you would have to pay these expenses out of your own pocket.

3. Peace of Mind

Another important benefit of having health insurance is peace of mind. Knowing that you have coverage in case of an unexpected medical emergency can provide a sense of security and reduce stress levels. With health insurance, you can focus on getting better instead of worrying about how you're going to pay your medical bills.

4. Access to Quality Care

Having health insurance also gives you access to quality medical care. With insurance coverage, you can choose from a wider range of healthcare providers, including doctors, hospitals, and specialists. Additionally, some insurance plans offer additional benefits, such as wellness programmes, preventative care services, access to international specialists, and discounts on prescriptions, that can help you stay healthy and save money in the long run.

5. Consequences

Cancelling your health insurance can have long-term consequences that may make it difficult to re-establish coverage in the future. This is because insurance companies typically require a thorough underwriting process to determine the level of risk you pose as an insured individual.

When you first apply for health insurance, the insurance company assesses your health status and medical history to determine your risk of developing certain health conditions or requiring medical treatment in the future. Based on this assessment, the insurance company sets your premiums and determines the extent of your coverage.

If you cancel your health insurance and then decide to re-establish coverage, perhaps in years to come, you will likely need to go through the underwriting process again. This means that the insurance company will reassess your health status and medical history, and you may be subject to additional medical exams and tests.

If you have developed any new health conditions or have a change in your medical history since you last had health insurance, this could impact the level of coverage you are offered, or even result in a denial of coverage altogether. Additionally, any new health conditions that arise during the period when you were uninsured may be considered pre-existing conditions, which could result in limited coverage or higher premiums.

In other words, cancelling your health insurance can make it difficult and costly to re-establish coverage in the future, which can leave you vulnerable to significant financial and health risks. Therefore, it's important to consider the long-term consequences of cancelling your health insurance and weigh the benefits and risks carefully before deciding.

Related article: Should you cancel an insurance policy to save money?

6. Life is Unpredictable

Finally, life is unpredictable, and unexpected medical emergencies can happen at any time. Even if you are young, healthy, and have never had any major medical issues, accidents and illnesses can happen to anyone. Having health insurance provides you with a safety net that can help protect you and your family from unforeseen medical expenses.

The Bottom Line: Never Cancel Health Insurance

Health insurance is an essential aspect of financial protection that provides you with financial security, peace of mind, and access to quality care. Even if you live in a country like New Zealand - with free or subsidised healthcare - there are still significant advantages to having and keeping private health insurance.

Sometimes, the cost of health insurance may seem like an unnecessary expense, especially when you are young and healthy. However, cancelling your health insurance is a risky decision that can leave you vulnerable to significant financial difficulties in the future. A single medical emergency can quickly accumulate enormous costs that could potentially bankrupt you without insurance coverage.

Moreover, life is unpredictable, and unexpected medical emergencies can happen to anyone at any time. Health insurance provides a safety net that can help you navigate unforeseen medical expenses, giving you peace of mind and the ability to focus on your recovery.

To wrap it up, it's clear that you should never cancel your health insurance if at all possible. It's an investment in your health and financial security that can save you from significant stress and hardship in the long run. While the cost of insurance may seem like a burden, it's essential to remember the benefits that come with having it. So, take the time to research different health insurance options available to you, and find a plan that fits your needs and budget. Trust us; you won't regret it.

It’d be the pleasure of one of our trained professionals to help you work through any of the topics mentioned above, so please get in touch.