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Families with kids in their 20s could soon save around $3,000

Any parent can tell you, financially supporting your kids doesn't end once they turn 21. It's also why many health funds allow adult children to remain on the family policy up to the age of 25.

But there's a small - but significant change - about to come into force that could save families thousands of dollars on their health insurance. Especially parents with two or more children aged 18-30.

Some funds are putting up the age limit for adult children to 31. It's not been widely communicated but it could help thousands of families get exceptional value on their cover.

Here's how.

Why are age limits going up on family health insurance?

Two years ago, the federal government raised the limits to allow children to stay on the family health cover up to the age of 31, provided they weren't married or in a 'de facto' relationship.

It's easy to understand why the government made this change:

Younger Australians are dropping off their parents' health cover and weren't taking out their own cover, meaning thousands of twentysomethings have no cover.
The level of cover somebody in their mid 20s can afford is far less than the level of cover families typically hold and is unlikely to include items that the under 30s view as important, like psychology or pregnancy.
Adult children are often still dependent on their parents - 17% of 25-29 year olds still live at home.

But insurers haven't raised the age limit, until now. And many funds still haven't indicated if they'll make this change.

That might be because savvy parents who keep their kids on their cover for longer can save the family several thousand dollars on their health insurance – all while giving twentysomethings access to a level of cover they wouldn't ordinarily be able to afford.

I'll show you how that works in a moment, but here's what we know so far.

More than 30 insurers have indicated they will increase their age cap.
These include the bigger funds such as Medibank, Bupa, and HCF, along with some restricted funds like Teacher's Health.
Most funds will typically charge a 25% loading to keep an adult dependent on a policy up to the age of 31, unless they're in full-time education.
The majority of these funds will start rolling out the changes from September 1.
Insurers can choose not to cover certain types of dependants – Teachers' Health appear to have a restriction around children in a relationship, while other funds don't.
Not all insurers will cover disabled dependants.

It's all a bit confusing. But armed with a bit of knowledge, here's how you can save.

How to save money on your family health insurance

Let's say you're a family of four and the adult children are 24 and 26 respectively and you're paying $625 a month for combined Silver Plus Hospital and higher tier extras.

That's made up of the $500 a month cost of the policy plus the additional 25% for the 24-year-old ($125).

The 26-year-old has been paying for their own cover for a year, as the health fund's upper age limit is 25.
The older child is now paying $250 a month for a Bronze singles policy with a low level of extras.
In total, this family is paying $10,500 a year for two policies ($7,500 for the family cover, $3000 for the 26-year-old's singles cover).
The insurer raises the age limit and the 26-year-old rejoins the family cover. There's no additional loading fee – that additional 25% doesn't change whether you have one or five adult kids under 30.
Now the whole family is paying $7,500 a year for cover - a saving of $3,000.
If mum and dad get the two kids to pay for the extra 25%, that's a very affordable $62.50 a month – and an extra $187.50 back into the 26-year-old's pocket.
It's not only the monthly savings. Both kids will be able to get access to a much higher level of cover than they could afford by themselves. That could include higher annual dental limits, 80% rather than 60% back at the physio, and psychology extras included.

It's a fantastic saving. Mum and Dad get peace of mind that their kids have a high level of cover and the two kids save hundreds.

The bottom line

The cost of living is going up and this is one of the best ways for the whole family to save.

But don't expect your insurer to be shouting about this change. After all, it's costing them money.

Speak to your current health fund. And then shop around – plenty of health funds are also hiking up their premiums in October or November so there's an opportunity to save even more.

This will be the most profitable family conversation you'll have all year.