Co-Insurance in Australia 2026: How It Affects Your Premiums and Claims

Co-insurance refers to the percentage of costs you agree to pay out-of-pocket when making a claim, after any excess has been applied. Unlike an excess (a fixed sum), co-insurance is a shared proportion between you and your insurer. For example, if your policy has a 20% co-insurance clause, you pay 20% of the claimable amount, while your insurer pays the remaining 80%.

• Health insurance: Common in hospital cover, especially for in-patient services.

• General insurance: Found in some business and property policies, particularly where underinsurance may be a risk.

As of 2026, many private health insurers in Australia have tweaked co-insurance rates in response to rising medical costs and regulatory changes, so it’s crucial to check your policy details before you need to claim.

Let’s say you have a hospital cover policy with 25% co-insurance. If you’re admitted for a procedure costing $4,000 (after the Medicare rebate and any excess), you would pay $1,000, and your insurer would cover $3,000. The higher your co-insurance, the lower your premium tends to be—but your out-of-pocket costs at claim time will be higher.

In property insurance, co-insurance often comes into play if your property is underinsured. For example, if your building is insured for only 70% of its actual value, a co-insurance penalty may mean you’re responsible for a proportional share of any claim, not just the shortfall. This can catch many policyholders off guard.

• Tip for 2026: With the cost of rebuilding and medical procedures up by 8-10% year-on-year, check your sums insured and co-insurance terms annually.

The Australian Prudential Regulation Authority (APRA) and the Private Health Insurance Ombudsman have both flagged the rising prevalence of co-insurance in 2026. Key updates include:

• Increased transparency: Insurers must now clearly disclose co-insurance rates and potential out-of-pocket costs in policy documents and renewal notices.

• Cap on co-insurance: For some hospital procedures, a national cap on maximum co-insurance has been introduced (currently 35% for selected treatments) to protect consumers from bill shock.

• Business insurance focus: APRA has urged business policyholders to review co-insurance clauses, especially for interruption and cyber policies, as claim disputes have risen with more complex risk profiles.

These reforms aim to ensure consumers understand their obligations and aren’t left with unexpected expenses after a claim.

With co-insurance likely here to stay, savvy Australians can take steps to manage their exposure:

• Review your sums insured: Make sure your property and contents are insured at today’s replacement costs, not last year’s estimates.

• Ask about co-insurance rates: Don’t assume all policies are the same—compare and negotiate with insurers, especially at renewal time.

• Understand the trade-off: Lower premiums with higher co-insurance may suit some, but always weigh the risk of higher out-of-pocket costs in the event of a claim.

• Use comparison tools: Many 2026 insurance platforms now highlight co-insurance rates alongside premiums and excesses, making apples-for-apples comparison easier.

And if you’re unsure, ask your insurer to clarify the likely out-of-pocket costs for common claims scenarios—it could save you thousands.