Should you cancel your health insurance policy?
Before cancelling your policy, why not chat with our team about your other options? There may be another policy that better suits your current needs.
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Cancelling private health insurance
You can cancel your health insurance policy at any time by contacting your health insurance provider. However, the short-term financial benefits could be negated should you need medical treatment in the future. Whether you should cancel your private health cover is a decision that only you can make.
However, there are some common reasons people choose to cancel health insurance:
- You’re not using up your annual limits on your extras cover policy or you’re paying more in premiums than you claim.
- Your out-of-pocket costs for private hospital treatment are too expensive even with cover.
- Your financial situation has changed since taking out cover.
While these are all valid reasons to cancel your health insurance cover, you should first consider some of the alternatives to cancelling. Switching to a different policy, reducing your cover, changing your excess, or suspending your cover are all potentially better options.
How do you cancel health insurance?
In Australia, cancelling your health insurance policy requires you to contact your health insurance provider and tell them you intend to cancel. You can usually do this over the phone or online.
If you’re cancelling within the first 30 days of your policy and haven’t yet made a claim, you’ll likely fall under your insurer’s cooling-off period, meaning you can request a full refund of any premiums paid.
If you’re cancelling to switch to a new insurer, you’ll want to obtain a clearance certificate from your old insurer. This certificate is given to your new insurance company, so they have a summary of your policy history. Without your clearance certificate, you may be required to serve unnecessary waiting periods.
Things to consider before cancelling health insurance
The potential consequences of cancelling your cover include higher out-of-pocket medical expenses, longer waiting times for surgery as a public patient and the possibility of being hit with the Medicare Levy Surcharge depending on your income. Depending on how long you plan to go without cover, you may have to pay Lifetime Health Cover loading if you get health insurance again. If you’re looking to save money, it may be worth using a health comparison tool to see if there is a more affordable policy that suits your needs.
Public waiting lists
There are public waiting lists to receive treatment or see a specialist through the public health system. When you’re treated as a public patient for an elective surgery, the amount of time you’ll need to wait will depend on the severity of your condition and the overall demand. If your condition isn’t considered urgent, you might have to wait a considerable amount of time before your surgery.
Without private hospital cover, the cost of being treated in a private hospital can result in significant out of pocket costs. This means that you’ll most likely need to rely on the Australian public health system for any in-hospital medical treatment.
Medicare Levy Surcharge
The MLS is an additional tax of either 1%, 1.25% or 1.5% that you’re required to pay depending on your income. If you earn over the income threshold and cancel your private hospital insurance, you’ll need to start paying the Medicare Levy Surcharge (MLS) at tax time.
To avoid the MLS, you need a hospital insurance policy from a registered health fund with an excess of $750 a person or less. If you’re a family earning above the family income threshold, every family member will need to be included on the policy to avoid the levy.
The MLS is applied as a pro-rata amount for every day of the financial year that you do not hold an appropriate hospital insurance policy, so you will need to hold cover for the full year to avoid the MLS entirely.
Depending on your income, you could save money by taking out a policy that exempts you from the MLS. Consider the MLS thresholds listed below:
| Medicare Levy Surcharge – Income Tiers (all ages) | ||||
|---|---|---|---|---|
| Surcharge rate | 0% | 1% | 1.25% | 1.5% |
| Single income thresholds |
$105,000 or less ($0 payable) |
$105,001 – $123,000 (~$1,050 – $1,230 payable) |
$123,001 – $164,000 (~$1,537 – $2,050 payable) |
$164,001+ ($2,460+ payable) |
| Family income thresholds^ |
$210,000 or less ($0 payable) |
$210,001 – $246,000 (~$2,100 – $2,460 payable) |
$246,001 – $328,000 ($3,075 – $4,100 payable) |
$328,001+ (~$4,920+ payable) |
|
Retrieved from Australian Taxation Office | Information current from 1 July 2026. Dollar amounts payable are rounded up. ^ For families with children, thresholds increase by $1,500 for each child after the first. Families include couples, de facto couples, and single parents. |
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Lifetime Health Cover loading
The Lifetime Health Cover (LHC) loading is an additional cost added to your hospital insurance premiums if you do not hold hospital cover by 1 July following your 31st birthday. This accrues at 2% for every year over the age of 30, up to a maximum of 70%. Unfortunately, if you cancel your health insurance (including your hospital cover), your LHC loading may start to accrue again.
If you’re over 31 and choose to cancel your hospital cover, you’re allowed a total of 1,094 days without cover before the loading starts to accrue again for your next policy. That amounts to one day less than three years. While this might seem like a lot, these days of absence are over your entire lifetime, so if you use them up now, they won’t be available in the future.
If you think you might want to be covered again in the future and don’t want to use up your days of absence, you could consider either suspending your cover or changing to a cheaper hospital policy.
Waiting periods
A waiting period is the initial time you must hold your policy before you can begin making claims. The length of your waiting period will vary depending on the treatment, whether it’s a pre-existing condition and your choice of fund.
When you’re switching health insurance, health funds are required to carry over any waiting periods served for private hospital cover and your served waiting periods for extras cover, although you will likely need to wait to use any upgraded cover.
Unfortunately, if you choose to cancel your cover without taking out a new policy within a set period of time, you could lose the ability to transfer your served waiting periods. This means that if you choose to take out cover again in the future, you may have to serve the same waiting periods again.
Alternatives to cancelling
Changing your policy or switching health funds are alternatives to cancelling your policy that will allow you to keep your cover while still potentially saving money. Before you cancel your health insurance, consider your reason for cancelling and see if any of these alternatives could be a better fit.
Changing health insurance policies
You can change health policies at any time and this can be done online or over the phone. Depending on your circumstances, switching to a policy that better suits your needs and budget might be worth considering over cancelling your cover altogether.
Here are a few ways that you can change your health insurance depending on your needs.
- Type of cover. There are two main types of health insurance, hospital and extras. If you feel like your health insurance doesn’t suit your healthcare needs, you might want to consider changing types. For example, if you’re comfortable with the public health system but want cover for dental check-ups, you might want to switch to extras cover only. Just keep in mind, this could have implications on your waiting periods, MLS and LHC.
- Level of cover. Depending on your reason for cancelling, changing your level of cover may be a better option. For example, if you feel like you’re paying for cover you’re not using on your current policy, you could switch to a lower level of cover with a lower premium that still covers the services you use.
- Who’s covered. When you’re on a couples or family policy, everyone on the policy is covered for the same services and the cost per adult is typically comparable to separate singles policies. By switching to individual singles policies, you can better tailor your cover to your personal needs, and potentially reduce your premiums.
- Excess. Your excess is an amount you pay out-of-pocket on a private hospital admission with hospital insurance. Many health funds will let you reduce this amount in exchange for higher premiums and vice versa. If you have an idea of how often you expect to claim on your policy, you could save money by changing your excess.
Switching health funds
Switching health funds can be done at any time. While it can provide some comfort to stick with a health fund you know and trust, you shouldn’t assume that there aren’t any more suitable policies available in the market. Each year, health funds update their premiums by different amounts in the health insurance rate rise, meaning the best value policy for you last year may no longer be as competitive.
For example, in 2026, the average premium rise was 4.41%. However, when looking at individual funds, the lowest average change was 1.98% while the highest was 5.98%. This is why it’s a good idea to compare health funds regularly.
Many health funds offer special deals or promotions to encourage new members to take out cover, which could also make it worth switching.
Suspending cover
Some health funds allow eligible members to suspend their cover for certain reasons, such as extended overseas travel. During an approved suspension, premiums are generally not payable and claims cannot usually be made. If you’re considering cancelling your health insurance because of financial hardship, you might want to consider suspending your cover instead.
When you suspend your cover instead of cancelling, you don’t use up the days of absence for the LHC loading and your waiting periods don’t reset. Suspending your cover can also be a good idea if you’re going to be out of the country for an extended period of time.
Meet our health insurance expert, Steven Spicer
As the Executive General Manager of Health, Life and Energy, Steven Spicer is a strong believer in the benefits of private cover and knows just how valuable the peace of mind that comes with cover can be. He is passionate about demystifying the health insurance industry and advocates for the benefits of comparison when it comes to saving money on your premiums.
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