Travel insurance vs private health insurance for working holiday makers: what is the difference?

The choice between travel insurance and OVHC is not really either-or. The right answer for most working holiday makers is a combination that fills the gaps in each.

What does travel insurance cover?

A comprehensive travel insurance policy typically covers:

• Medical emergencies: hospital treatment, surgery, doctor visits in Australia
• Repatriation: flying you home if seriously ill or injured
• Trip cancellation: refund of pre-paid travel costs if you cannot travel
• Lost or stolen baggage: replacement of essential items
• Trip interruption: costs if your travel is interrupted by illness or emergency
• Personal liability: if you accidentally injure someone or damage property
• Emergency evacuation: from remote areas, by air if needed
• Cancellation of paid activities: tours, accommodation, transport

Coverage periods are usually capped at 12 to 18 months, with renewal options for longer stays. Many policies also exclude or limit cover for:

• Pre-existing medical conditions
• High-risk activities (some adventure sports, scuba diving below certain depths, motorcycle riding without a licence)
• Work-related injuries (this is a critical gap for working holiday makers, see below)

What does OVHC cover?

OVHC is purchased from an Australian private health fund and is structured like Medicare cover. A typical OVHC policy includes:

• Public and private hospital admission
• Emergency department visits
• GP consultations (usually with a small gap fee)
• Specialist consultations
• Subsidised pharmaceuticals
• Diagnostic imaging and pathology
• Optional extras: dental, optical, physiotherapy, chiropractic

OVHC is renewable indefinitely while in Australia and can be the primary cover for ongoing medical needs. The premiums are paid monthly or annually, and the cover starts on a chosen date.

OVHC typically does not cover:

• Repatriation home
• Travel within Australia or to nearby countries
• Trip cancellation
• Lost baggage or theft of personal items

Why do working holiday makers often need both?

The reason both are usually appropriate is that each covers what the other does not:

• Medical emergency in Sydney: covered by both OVHC and travel insurance, but OVHC is typically faster to claim and has lower gaps
• Repatriation to Germany after serious injury: covered by travel insurance, not by OVHC
• Lost passport in Cairns: covered by travel insurance, not by OVHC
• Theft of laptop and phone: covered by travel insurance, not by OVHC
• Routine GP visit for a respiratory infection: covered by OVHC, partially by travel insurance with high excess
• Trip to New Zealand or Bali during the working holiday: covered by travel insurance, not by OVHC

For a working holiday maker staying for a full 12 months and travelling within Australia, having both fills nearly all the realistic gaps.

The work-related injury gap

The single biggest insurance gap most travel insurance policies have for working holiday makers is exclusion of work-related injuries. Most travel insurance policies are designed for tourists, not for travellers earning wages. If you are injured while working at a farm, in hospitality, in construction, or in any other paid role, the travel insurance policy may refuse the claim.

Work-related injuries are instead covered by:

• Workers compensation through your employer (see our article on workplace injury rights)
• OVHC for treatment costs not covered by workers compensation
• Medicare (for RHCA-country nationals enrolled in Medicare)

Always check the work-related exclusion in any travel insurance policy before assuming you are covered.

Cost comparison

Approximate annual costs for a single working holiday maker:

• OVHC, basic hospital only: $1,000 to $1,800 per year
• OVHC, hospital plus extras: $1,800 to $4,000 per year
• Comprehensive travel insurance, 12 months: $400 to $1,200 per year
• Combined OVHC and travel insurance: $1,500 to $5,000 per year

The combined cost might seem high, but a single uninsured emergency can cost more than the lifetime cover.

What to look for in either product

When choosing either type of insurance, check:

• Excess: how much you pay out of pocket before the insurance applies
• Waiting periods: pre-existing conditions, pregnancy, mental health
• Geographic coverage: Australia only or wider region
• Activity exclusions: adventure sports, working with animals, farm work
• Work-related exclusions: critical for working holiday makers
• Repatriation cover and limits
• Mental health cover
• Dental and optical coverage
• Claims process: how quickly claims are processed and paid

How does insurance interact with tax?

For most working holiday makers, neither travel insurance nor OVHC affects your tax position:

• Premiums are not deductible against working holiday income
• Claim payouts are generally not taxable income
• The Medicare Levy Surcharge does not usually apply (working holiday makers are typically not Australian residents for tax)
• The private health rebate does not apply to OVHC for working holiday makers

When you lodge your tax return through our service, we account for your insurance status correctly so the levy is excluded where it should be. Get in touch with our team if you are uncertain about how your insurance affects your tax position.

How does our service support working holiday makers?

Our team does not sell insurance, but we coordinate with the financial and tax implications of insurance and medical events:

• Reviewing how insurance status affects Medicare levy on your tax return
• Identifying tax interactions if you receive an insurance payout
• Coordinating DASP and tax timing if illness or injury affects your departure date

A working holiday maker's insurance setup is a personal decision, but the tax side connects to it. Get in touch with our team for help with the tax interactions.