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Standalone vs bundled life insurance

Bundled life insurance can be cheaper than a standalone policy. Find out if it works for you.

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When you buy life insurance, you often have the option of adding other types of life cover to your policy, including trauma and total and permanent disability (TPD) cover. In many cases, this is usually a cheaper and easier way to financially protect yourself and your family than buying individual policies.

What's the difference between bundled and standalone trauma insurance?

Trauma insurance often comes bundled with life insurance. This means that you'll get covered for trauma (e.g you'll get a payout if you suffer a critical illness or injury) and death (your family will receive a large lump sum when you die).

The biggest difference is the impact on cost. Bundling a policy is usually cheaper than holding two individual policies. This is because, if you take out a $1 million life insurance policy with $200,000 trauma cover and you need to claim for trauma, you would lose the opportunity to claim on your life policy in full, meaning you'll have $800,000 life cover, not the original $1 million.

In contrast, if you had two standalone policies – one life insurance and one trauma insurance – after you made a trauma claim, your life insurance wouldn't be affected. As a result, it usually costs more.

Is the cover the same if it's bundled?

Yes. In most cases what you're covered for is the same as if you'd bought a standalone policy. Generally, the only difference is that a bundled policy will reduce your life insurance benefit if you claim on the trauma portion.

But this can be rectified. If you do make a trauma claim with a bundled policy, you are often given a buy-back option. This allows you to reinstate the full amount of your life insurance policy, usually around 12 months after you've made a trauma claim.

What are the pros and cons of standalone trauma?

Some of the advantages and disadvantages of standalone trauma cover include:

Pros

  • It won't affect your life insurance benefit.
  • You may want to keep your insurance policies separate.

Cons

  • It's more expensive than a bundled policy.
  • You may never need to claim on your trauma insurance, so the cost might not be worth the risk.

What are the pros and cons of bundled trauma?

And the advantages and disadvantages of taking out bundled trauma cover are:

Pros

  • It's a lot cheaper.
  • It often comes with life cover buy-back when combined with life insurance.
  • It's convenient and only requires one premium payment for multiple types of cover.

Cons

  • It can reduce your total life insurance benefit.
  • Without a buy-back option, you could lose part of or your full life insurance cover.

Get trauma insurance quotes from some of our partners

Name Product Maximum Cover Maximum Entry Age Expiry Age Stand Alone or Add on hide
AHM Trauma Insurance
$500,000
60
65
Add on
Get a quote for up to $500,000 in Trauma Cover.
Medibank Trauma Insurance
$500,000
60
65
Add on
Get a quote for up to $500,000 in Trauma Cover.
Guardian Serious Illness Insurance
$500,000
59
Not Stated
Add on
Get a quote for up to $500,000 in Trauma Cover.
NobleOak Trauma Insurance
$2,000,000
59
70
Add on
Get a quote for up to $2,000,000 in Trauma Cover.
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Compare up to 4 providers

Do I need the life cover buy-back option?

You don't need the life cover buy-back option if you don't mind your total life insurance benefit payment being reduced by a trauma claim. It all depends on how much you need to pay off all your debts. For instance, you usually want a life insurance benefit to pay for:

  • All your debts, including the mortgage, credit cards and other loan repayments
  • School tuition fees
  • Living expenses for your family

In some cases, a trauma benefit payment can go towards these expenses so you may not need the life cover buy-back. However, it's very common that trauma benefits go towards medical treatment and other expenses you need to take care of if you get sick, such as mobility equipment for your home.

The most important thing is to have enough life cover to ensure you're leaving your loved ones with enough to cover any debts and final expenses you might have. If a trauma payment is going to prevent that from happening, consider the life cover buy-back option.

What doesn't it cover?

Whether you buy it bundled or as a standalone policy, trauma insurance doesn't cover every illness. It only covers critical illnesses including:

  • Alzheimer's
  • Accidental HIV infection
  • Blindness
  • Coma
  • Dementia
  • Kidney failure
  • Leukaemia
  • Loss of hearing
  • Loss of independence
  • Loss of limb
  • Loss of speech
  • Major brain injury
  • Major organ transplant
  • Motor neurone disease
  • Multiple sclerosis
  • Parkinson's disease
  • Quadriplegia
  • Terminal illness

In most cases, it won't cover you for minor illnesses or injuries, for example a back injury or mental health issue. If you want cover for this, you'll need to look at income protection.

Bottom line

Unless you're set on standalone cover, a bundled life and trauma insurance policy can be a very effective way of getting covered for multiple risks. Begin comparing policies that include trauma cover here.

Frequently asked questions

What is trauma reinstatement?

Trauma is similar to life cover buy-back. It's an optional benefit that lets you buy back 100% of your trauma insurance benefit 12 months after a claim is paid.

Can you get child trauma on a bundled policy?

Yes. Child trauma is often available as an optional benefit with some life insurance policies.

Does claiming child trauma impact life insurance?

Yes. If you get it bundled, child trauma will usually impact your life insurance benefit in the same way as trauma cover, unless stated otherwise by the insurer.

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