Choosing the best health insurance – or even just taking the plunge into having a policy – can be a daunting task, particularly for somebody wading into it for the first time.

There are many factors to consider, including the type of cover needed, budget considerations and the waiting periods or exclusions.

Do I need health insurance?

Medicare covers plenty of vital services, but there are many others encompassed in private health insurance that aren’t.

They include dental and orthodontics, glasses and contact lenses, physiotherapy, chiropractic care, home nursing and speech therapy.

Other reasons people may choose private health insurance include being able to choose a doctor, specialist or preferred hospital, being able to receive treatment faster in a private hospital compared to the public waiting list, and receiving government incentives or tax breaks.

There are also financial considerations for many of us – there can be tax penalties for not having health insurance.

The Australian Competition and Consumer Commission warns that buying health insurance will reduce a person’s tax bill only if their income is above a certain threshold.

The Medicare levy surcharge applies to individuals with annual taxable incomes above $90,000, and families who earn more than $180,000.

Another factor to consider is the federal Lifetime Health Cover policy. It encourages people to purchase and maintain private hospital cover earlier in life.

If a person hasn’t taken out private hospital cover before the year they turn 31, a 2 per cent loading is applied on top of the health insurance premium for every year they are aged over 30.

The maximum loading is 70 per cent – although the loading ends when you’ve paid it and held health insurance for 10 continuous years.

People are stung with extra loading if they don’t take out coverage before the age of 30. Photo: Getty

Choosing the best policy

There are two types of health insurance cover: Hospital cover for treatment and ancillary (or extras) cover for ambulance, optometry, dental, physiotherapy and other health services.

Many policies combine the two, but the consumer watchdog recommends talking to a doctor and considering health needs when buying or renewing health insurance.

There are several considerations when choosing a policy, including if the holder is likely to suffer a sports injury, have a baby or need major surgery, such as a hip replacement, in the near future.

It is important to shop around and make sure the final chosen policy offers the coverage required, is affordable compared to other options, and is from a reputable source.

“It might not always be best to choose the cheapest policy,” the ACCC said.

“Some cheaper products have lower levels of cover, higher out-of-pocket expenses and smaller rebates, so they may not be value for money in the long run.”

There are websites that will compare policies and help the holder choose one that works for them. They include comparethemarket.com.au, canstar.com.au and compareclub.com.au.

Some policies will waive waiting times on extras, but most will expect you to wait some time before you can access the full range.

They are usually two months for most services, 12 months for major dental, and potentially three years for services like hearing aids.

It’s important to remember that if you increase your cover or lower your excess, it can reset the waiting times.

It’s important to regularly review whether your policy is the best one for your situation. Photo: Getty

Regularly review

Another important step – after signing up for a policy – is checking regularly to ensure it is still the best one for you.

Those same websites used to compare policies are a great resource, but talking to your health insurance provider could result in a better deal than the one you are already on.

Many people waste money on extras or coverage they may never need. Regularly reviewing your needs and whether your policy suits them is always a smart idea.