Types of life insurance in Australia
Learn the types of cover available and what's right for you
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What's covered by trauma insurance?
Trauma Insurance (also known as critical illness cover) provides you with a lump sum payment if you suffer a serious medical condition such as a heart attack. A trauma benefit can be used to:
- Remaining medical bills, including out-of-pocket expenses.
- Rehab, if not already covered by health insurance
- A live-in nurse if you need it
- Home alterations to accommodate your condition
- Everyday life expenses like bills, groceries and petrol
- A holiday to take your mind off things
Trauma insurance can either be bought by itself or in conjunction with death cover (life insurance), cover for your salary (income protection) and disability insurance (TPD).
What types of "critical illnesses" are covered?
The two most common types of trauma insurance claims that people make are related to cancer, heart attacks and heart diseases. These are usually covered by most, if not all trauma insurance policies.
Cancer
Heart attacks and diseases
Standard conditions covered
- Automatically included conditions. Depending on the policy, conditions that are usually covered automatically include:
Extra conditions for an added cost
- Additional conditions. Types of conditions that you can also get covered for an extra premium:
Although most trauma insurance claims are for cancer, heart disease and stroke, some Australian insurance providers offer cover for as many as 50 conditions. The range of conditions covered by trauma insurance varies between providers. Therefore, it is important to check with your insurer what events are covered.
Note: Some conditions are only covered partially e.g. 50% of your sum insured.
Do I need trauma insurance?
It will depend of course on your personal circumstances, but as a general guide:
| Good for | Not good for |
|---|---|
|
|
Trauma insurance isn't the first thing on anyones mind. However...
It's important to think about the impact of life-changing condition. If you were diagnosed with cancer and had to quit your job, without knowing when or if you might be able to return to work, what would you do with your mortgage?
Imagine paying for your dream house, only to get diagnosed with cancer. Then imagine beating cancer, only to be left without a roof over your head.
Consider these potential costs in the event of a major illness
Advancements in medicine now mean that being diagnosed with a serious illness such as cancer isn't always fatal. However, surviving the illness comes with real costs including:
- Medical costs not covered by health insurance
- The costs of rehabilitation
- The inability to work while you recover
The development of trauma insurance and its introduction to the market was due to the realisation that these types of expenses can cause significant financial burden to families if diagnosed with serious and terminal illnesses.
Check your life stage and needs
One way work out if trauma insurance is suitable for you is by taking a look at your life stage. In general, it's ideal to take out trauma insurance from 25-45 years of age.
Trauma insurance isn't just for those with dependants
Anyone can benefit from trauma insurance. The trauma insurance market is very wide and this includes single people who wish to maintain financial independence, a homemaker, those who would like to be able to choose private medical care rather than remain on the waiting list and those individuals who are at risk of developing illnesses as traced through their family history.
Who should consider taking out trauma insurance?
Trauma Insurance is really worth considering for anyone who does not have the financial backing to deal with the costs that may be associated with suffering a Trauma condition. This may include:
Trauma insurance, like most other life insurance products, is built for people whose financial lives would be upended by an unexpected illness. This may include:
- People with dependent families
- People who don’t want to burden friends and family
- Recently married couples looking to protect their families' futures
- People with term life insurance who want the extra protection against trauma
So is it worth my money?
Great, trauma insurance is important. But is it worth your money? What if you already have life insurance in place? Consider the following.
It covers you where other forms of insurance won't
Trauma insurance can offer cover in areas where life insurance, income protection and disability insurance fall short:
- Unlike life insurance. Trauma insurance pays out if you survive a critical condition (as opposed to when you die).
- Unlike disability insurance and income protection. Trauma insurance will pay out on diagnosis (as opposed to after you prove you are unable to work).
- Unlike health insurance. Trauma insurance can be used however you like (as opposed to being bound to specific medical benefits).
Five ways trauma cover can help out during a tough time
Trauma insurance offers a lump-sum payment (that in many cases is up to $2 million) if you develop a serious illness or injury. Here are some real-life examples of how critical illness cover is used:
1. Ability to afford the best medical treatment
With trauma insurance, choosing the best medical treatment available becomes a legitimate option. You could use the lump sum you receive to fill in the gaps where your health insurance may not cover the full cost of treatment.
2. Meet the long-term costs of a life-changing illness
The cost of surviving a critical condition such as a heart attack can be ongoing and is not typically covered by health insurance. You can use your benefit payment to alleviate any financial stress brought about by additional medical expenses, such as rehabilitation, carers and changes to the home.
3. Take a holiday with your family
After being diagnosed, you'll probably want to spend as much time with your family as possible. Trauma insurance lets you spend quality time with your family without having to worry about the costs.
If the illness is untreatable or the chances of survival are slim, you can use the money to fund family holidays and dream experiences. While it may seem inconsequential, the holidays could let the family spend time together and create some memories. It also allows the family member suffering from the critical illness to enjoy a quality life during their final months.
4. Take time off from work without any worry
When you have a critical illness, there is a good chance you will need to take some time off work or even stop working altogether to get extra care. Trauma insurance will allow you to get the assistance you need while you are receiving treatment. Both you and your spouse can take some time off from work without having to worry about having enough money.
5. Achieve your financial goals
When tragedy strikes, you may not be able to generate the same income you were making before since you may no longer be able to work or your spouse may work less to take care of you. You can use your trauma insurance to pay off the following financial commitments:
- You can pay for someone to take your place if you are the proprietor of your own small business.
- You can pay out any credit card or other debts to give you more cash flow.
- You can pay off your mortgage so that you know that no matter what happens in the future, your family will always have a roof over their heads.
The cost of trauma insurance vs the financial impact of major illness
Monthly cost of trauma insurance
As little as $22.53
Australians at risk of chronic disease
Over 50%
Average financial impact of a stroke
$100,000
Average financial impact of a heart attack
$281,000
Australians are prone to serious illnesses
What's the difference between trauma insurance and life insurance, etc?
Trauma insurance is usually part of a package with life insurance. Life insurance covers death but gives you the option to cover additional life events e.g. trauma cover.
| Details | Trauma Cover | Life Insurance |
|---|---|---|
| What's covered | Trauma insurance is essentially "living insurance". This means you are provided financial assistance in the event you are diagnosed with a life-threatening disease. | Life insurance is a form of death cover. This provides your family with financial assistance if you die during the term of the policy. |
| Is it available through super? | No | Yes |
| Form of payment | Lump sum | Lump sum |
Trauma insurance pays you out on the diagnosis of a condition (if covered by your policy). Total and permanent disability insurance on the other hand, pays out when you meet the insurers definition of a disability.
| Details | TPD Insurance | |
|---|---|---|
| Situations covered | You are diagnosed with a serious illness such as cancer. | You are unable to work due to illness or injury. |
| Condition of payout | You'll need to survive a traumatic event as defined by the policy. | You'll need to prove your inability to ever return to work. |
| Is it available through super? | No (not anymore) | Yes |
| Form of payment | Lump sum | Lump sum |
Income protection is primarily designed to replace some of your income if an injury or illness forces you out of work. Trauma insurance on the other hand provides lump sum for injuries or illnesses that are specified on the policy and not related to whether or not your put out of work.
| Details | Trauma Insurance | Income Protection |
|---|---|---|
| Situations covered | You are diagnosed with a serious illness such as cancer. | You are unable to work due to illness or injury. |
| How can you use the benefit? | It helps you pay for immediate and ongoing medical costs as well as changes to your life style. | It provides you with a portion of your regular income to help you maintain your standard of living while you are unable to work. |
| Is it available through super | No | Yes |
| Form of payment | Lump-sum payment | Regular payments (income protection) |
Do I really need trauma cover if I have health insurance?
Your Medicare and private health insurance can help pay for your hospital bills and medical expenses. However, your health insurance will not cover any loss of income, especially when you are unable to work for an extended period of time.
It also will not cover any expenses incurred that are outside the capacity of your health cover, such as rehabilitation, equipment, vehicle or home modification and nursing care costs, leaving you to pay these expenses out of your own pocket. Trauma insurance is an additional layer of cover on top of your health insurance in the event that you suffer from a more serious medical condition.
It will give you an extra financial buffer for any ongoing commitments that are not covered under your health insurance. You can read finder's full guide on the differences between trauma and health cover for a wider understanding.
Are Trauma Insurance Premiums Tax Deductible?
For individual policyholders such as employees or self-employed workers, premiums for trauma insurance can not be claimed as a tax deduction. Any benefits received are not treated as income. This is the case because the benefit is not providing a replacement of income, as is the case with income protection insurance, but a capital amount.
Are Benefit Payments Under Trauma Insurance Free From Capital Gains Tax?
If the person who received the benefit payment is either the policy owner or a defined relative, capital gains tax exemption applies.
Checklist
It's a good idea to go over this checklist first when comparing
- Check what you require in your policy. Some basic policies may only cover up to 10 medical conditions with more advanced policies offering cover for up to 30 medical conditions. It is essential you know exactly what is being covered before applying.
- Find a policy that can be tailored to suit your needs. Cheaper policies may have more restrictions on what the buyer can adjust in terms of how they want to pay their premiums.
- Compare the benefits on offer from each plan. Buyers should be aware of what each provider is offering in terms of special rebates or promotional offers.
- Compare premiums from each provider. Make sure you know exactly what the policy is covering.
What features should I compare on Australian policies?
Look out for the following policy information:
| Policy information | What does this mean? |
|---|---|
| Entry ages | Ages where you are able to buy a policy e.g. 18-65 |
| Expiry age | Age when your policy will no longer be valid and you will no longer be able to make claims. e.g 99 years of age |
| Maximum sum insured | Maximum amount that can be paid out in a claim e.g $10 million |
| Type of premium structure | This is the way you pay for your policy each year. Premiums can be levelled (same premium each year), stepped (rises each year but starts lower) or a hybrid (combination of both). |
| Life cover bundle | Trauma cover that's combined with life cover |
How much will trauma insurance cost me?
The cost of your policy depends on a number of variables specific to your situation, such as:
- Standard vs plus policy. A plus policy will cover more conditions but will also cost you more
- Your age. Premiums get more expensive as you get older and your risk of injury or illness increases.
- Your gender. Women in their mid 30s generally pay higher premiums then men of the same age as they have a higher chance of being diagnosed with cancer, particularly breast cancer. Men in their mid-50s men generally pay higher as are prone to cardiovascular disease.
- Your smoking status. As a smoker, or someone who has recently quit smoking in the last 12 months, your risk of illness and medical trauma are greater than a non smoker.
- Your benefit amount. The higher the benefit you opt for when taking out trauma insurance, the higher your premiums.
- Your family background and medical history. Family medical history and any pre-existing medical conditions will help the underwriter determine the level of risk that you carry.
- The insurance brand. Each insurance brand will usually have a different cost on policies with the same sum insured.
Sample cost of trauma insurance policies
The following table shows how the cost of your premium is affected by your sum insured and the brand you go with:
| Policy | Cost per month |
|---|---|
| MLC Insurance | $21.95 |
| AMP Flexible Lifetime Protection | $22.23 |
| BT Protection Plans | $23.97 |
| TAL Accelerated Protection | $24.07 |
| AMP Elevate | $24.55 |
| AMP Priority Protection | $24.55 |
| Macquarie FutureWise | $24.66 |
| ClearView LifeSolutions | $26.06 |
| OnePath OneCare | $26.61 |
| CommInsure Protection | $26.80 |
| Asteron Life Complete | $27.72 |
| Zurich Wealth Protection | $31.05 |
| Policy | Cost per month |
|---|---|
| AMP Flexible Lifetime Protection | $35.67 |
| MLC Insurance | $37.31 |
| BT Protection Plans | $39.46 |
| TAL Accelerated Protection | $40.78 |
| Macquarie FutureWise | $40.80 |
| AIA Priority Protection | $41.52 |
| AMP Elevate | $42.98 |
| CommInsure Protection | $43.07 |
| ClearView LifeSolutions | $44.17 |
| OnePath OneCare | $45.20 |
| Zurich Wealth Protection | $47.11 |
| Asteron Life Complete | $47.36 |
| Policy | Cost per month |
|---|---|
| AMP Flexible Lifetime Protection | $49.12 |
| BT Protection Plans | $50.30 |
| TAL Accelerated Protection | $54.99 |
| Macquarie FutureWise | $55.49 |
| AMP Elevate | $55.91 |
| MLC Insurance | $55.95 |
| CommInsure Protection | $56.82 |
| AIA Priority Protection | $56.88 |
| OnePath OneCare | $60.16 |
| Zurich Wealth Protection | $60.68 |
| ClearView LifeSolutions | $61.75 |
| Asteron Life Complete | $64.06 |
| Policy | Cost per month |
|---|---|
| AMP Flexible Lifetime Protection | $62.56 |
| BT Protection Plans | $64.23 |
| TAL Accelerated Protection | $70.87 |
| Macquarie FutureWise | $71.14 |
| AMP Elevate | $72.51 |
| CommInsure Protection | $73.15 |
| AIA Priority Protection | $73.31 |
| MLC Insurance | $74.60 |
| Zurich Wealth Protection | $76.51 |
| OnePath OneCare | $77.55 |
| ClearView LifeSolutions | $79.68 |
| Asteron Life Complete | $82.71 |
| Policy | Cost per month |
|---|---|
| AMP Flexible Lifetime Protection | $72.81 |
| BT Protection Plans | $74.30 |
| TAL Accelerated Protection | $82.57 |
| Macquarie FutureWise | $83.56 |
| AMP Elevate | $83.57 |
| CommInsure Protection | $86.09 |
| AIA Priority Protection | $87.97 |
| MLC Insurance | $88.86 |
| OnePath OneCare | $88.88 |
| Zurich Wealth Protection | $89.40 |
| ClearView LifeSolutions | $95.80 |
| Asteron Life Complete | $96.47 |
Claims
Types of claims people make with trauma insurance
What types of trauma claims do Australians make? According to a 2015 study of trauma claims by General Reinsurance the top claims for Australian males and females is cancer.
| Condition | Total % of claims (males) |
|---|---|
| Cancer | 62.1% |
| Ischaemic Heart Disease | 16.3% |
| Benign Brain Tumour | 5.6% |
| Stroke | 3.7% |
| Heart Surgery | 2.5% |
| Kidney Failure | 0.5% |
| Major Head Trauma | 0.8% |
| Paralysis | 0.1% |
| Chronic Liver Failure | 0.1% |
| Major Burns | 0.1% |
| Condition | Total % of claims (females) |
|---|---|
| Cancer | 85.2% |
| Stroke | 2.7% |
| Benign Brain Tumour | 2.7% |
| Ischaemic Heart Disease | 2.5% |
| Heart Surgery | 0.6% |
| Kidney Failure | 0.4% |
| Paralysis | 0.1% |
| Chronic Liver Failure | 0.1% |
| Aplastic Anemia | 0.1% |
| Systemic Lupus Erythematosus | <0.1% |
Tips for ensuring a successful trauma insurance claim
- Pre-existing medical conditions. While some policies can cover a pre-existing medical condition with limited cover, most policies won't. Don't assume you are covered straight away.
- Check the list of covered conditions. Trauma insurance will only pay out for medical events listed in the product disclosure statement (PDS).
- Disclose everything. If you have any previous medical history or if you work in a dangerous occupation, then you must disclose this with your insurer. Failure to disclose (even with conditions unrelated to your claim) could lead to an unsuccessful claim in some cases.
If I make a claim for trauma will I still have death cover?
If you take out a life insurance policy that includes trauma cover and make a trauma claim your policy will typically subtract the trauma benefit amount from your total death benefit. For instance if you have $1 million is life insurance with a $300,000 trauma benefit and make a claim you'll be left with $700,000 death cover.
Can I make sure I still have full life insurance cover after a claim?
Yes! the good news is that you can take out a buy-back option (double trauma) that allows you to reinstate your full life cover. Here's how it works:
| Life Insurance | Trauma cover | ||||
|---|---|---|---|---|---|
| Sum insured (before claiming) | $1,000,000 | $400,000 | |||
| Amount paid out on a trauma claim | -$400,000 | -$400,000 | |||
| Left over cover after trauma claim | $600,000 | $0 | |||
| Cover reinstated from double trauma option | +$400,000 | +$0 | |||
| Final cover after double trauma | = $1,000,000 | = $0 |
Further information
Trauma Insurance: Frequently Asked Questions
Am I eligible to apply for a Trauma Insurance Policy in Australia?
You can apply for cover in Australia if you are:
- Between the age 17 to 59 years old
- An Australian citizen or permanent resident
- Residing in Australia at the time of application
If I've already suffered a serious illness can I apply for trauma cover?
Unfortunately it is difficult to get cover for a pre-existing medical conditions. However, you can still get covered for most other un-related conditions with an exclusion on the specific condition you have previously been diagnosed with.
Example: if you're condition in the past was a heart attack, this how some insurers might cover you:
- Cancer
- Kidney failure
- Burns
- Lung disease
- Medically acquired HIV
- Heart attack
- Cardiomyopathy
- Open heart surgery
- Stroke
There are so many different forms of life insurance available, so below are some simple answers to questions which might be weighing on your decisions:
What exclusions are there when it comes to trauma insurance?
Self-harm
As with most types of life cover, Trauma Insurance will not provide coverage for intentional self-inflicted injury or attempted suicide.
Pre-existing conditions
Trauma insurance will usually not cover pre-existing medical conditions. However you can still get covered for events not related to a pre-existing medical condition. Note: You should always disclose anything prior conditions with your insurer.
Exclusion periods
Most policies won't cover you straight away for certain types of medical conditions. This is known as the exclusion period and go up to 90 days.
¹ https://www.insurancewatch.com.au/australias-3-1-trillion-underinsurance-crisis/
² http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=6442452954
³ http://www.health.gov.au/internet/main/publishing.nsf/Content/chronic-cardio
4 http://www.genre.com/knowledge/publications/ri15-4-droste-xiang-en.html
Picture:James Keuning licensed under Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Generic (image cropped)
Picture:Yo Szczepanska licensed under Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Generic (image cropped)
*The number of conditions covered will vary policy to policy. Always check the product disclosure statement to review what is and isn't covered.
Picture: Shutterstock
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