What is trauma insurance? Find a policy to help you and your family in the event of a serious illness.
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:
- Pay off immediate medical bills and rehab expenses
- Replace income and take care of your ongoing costs
- Protect you against future debts
- Take a holiday and time away from work
Is trauma insurance the same as total and permanent disability insurance?
No. 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.
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The two most common types of trauma insurance claims that people make are related to cancer, heart attacks and heart diseases.
|Heart attacks and diseases|
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.
Am I covered for pre-existing medical conditions?
Most policies will exclude the condition you have been diagnosed with but will still cover you for all other conditions.
What other conditions are covered by trauma insurance policies?
- Automatically included conditions. Depending on the policy, conditions that are usually covered automatically include:
- Additional conditions. Types of conditions that you can also get covered for an extra premium:
- Advanced Endometriosis
- Carcinoma in Situ of the Breast
- Deafness in one ear
- Diabetes complications
Key trauma facts: Australians are prone to serious illnesses
The popularity of trauma insurance grew from a realisation that standard life insurance was inadequate for many medical illnesses with a high survival rate
Trauma insurance will cover you with survival
Trauma insurance covers you upon diagnosis of serious illnesses, as opposed to life cover which pays out in the event that you pass away. Common conditions including heart attack, stroke, cancer and open heart surgery are covered when you are diagnosed.
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.
Claim statistics for males | Skip ahead to stats for females
|Condition||Total % of claims (males)|
|Ischaemic Heart Disease||16.3%|
|Benign Brain Tumour||5.6%|
|Major Head Trauma||0.8%|
|Chronic Liver Failure||0.1%|
Claim statistics for females | Go back to males
|Condition||Total % of claims (females)|
|Benign Brain Tumour||2.7%|
|Ischaemic Heart Disease||2.5%|
|Chronic Liver Failure||0.1%|
|Systemic Lupus Erythematosus||<0.1%|
Do claims get paid out for trauma insurance?
A study over two years indicates a small decrease in the number of successful accident and sickness claims:
|Year||Accepted claims (%)|
Source: General Insurance Data Report 2014-2015, Code Governance Committee.
Reasons for unsuccessful claims
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.
- How can trauma cover benefit me if I develop a serious illness?
- What additional trauma options can provide extra value for me?
- How is it different to income protection and life insurance?
- What features and benefits are offered on a policy?
- How much will trauma insurance cost me?
- Comparing and applying
- Further information
Trauma insurance provides a payment in a traumatic event. Some of the main benefits of this payment include:
|Core benefits of a trauma payment||Details|
|This benefit payment can be used to cover medical bills and also pay for alterations that need to be made to the policyholders home because of the injury such as a wheelchair ramp.|
|Some companies offer cover for as many as 60 conditions while others limit coverage to around 12 of the most common conditions. Conditions often include diabetes, Alzheimer's, loss of limbs, stroke, heart attack, cancer and brain tumors.|
|When you are trying to recover from or deal with a medical trauma, the last thing you want to be worrying about is work. That is why you can use your benefit amount to take some time off work, and allow your partner to take some time off too, so that you can concentrate on your recovery.|
|Unlike income protection insurance, trauma protection is not designed to be ongoing financial support, trauma insurance is designed to help cover short term medical bills and the cost of your rehabilitation, as well as paying off your debts so that you don't have to worry about a mortgage or losing your home while you recover.|
|Additional policy features||What does this do for me?|
|If the trauma insurance is linked to a life insurance policy, Buy Back option enables the policyholder to repurchase a level of term life insurance cover following a claim for critical illness. This "top-up" ensures there is a sufficient level of life cover in place following a claim payment.|
|Trauma protection provides valuable coverage for homemakers - who do not get paid for what the work that they do. With trauma cover, you are able to hire a nanny or housekeeper to perform house duties, while you rest and recover.|
|Insurance company provides a benefit to reimburse the cost of financial planning advice after a successful claim.|
|Policyholder is able to increase the cover amount every policy anniversary without having to go through any further medical underwriting.|
|Benefit provided to reimburse accommodation expenses for an immediate family member if the insured is bedridden and away from their home.|
|Lump sum benefit paid to assist policyholders support their child if they suffer a serious illness.|
|Premium waived if insured becomes totally disabled.|
Trauma Insurance vs Income Protection
|Trauma Insurance||Income Protection|
|Provides a lump sum payment if the insured suffers an event specified in the policy.||Income protection provides ongoing monthly benefits if the insured is unable to work due to an illness or injury.|
|Provides immediate financial relief in the event of a medical trauma, so that you and your family are able to keep up with medical expenses, rehabilitation costs and pay off debts.||Provides a replacement income when you need to take time off work to recover from an illness or injury and keep up with daily living expenses.|
Trauma Cover vs Life Insurance
|Trauma Cover||Life Insurance|
|Is a living insurance. It ensures your family receives a lump sum payment if you have been diagnosed with a life-threatening disease, once the survival period expires.||Life Insurance provides coverage in the event of your death or diagnosed with a terminal illness with less than 12 months to live. A lump sum amount is be payable to your nominated beneficiaries.|
Trauma cover can be a standalone policy or linked with the policyholders life cover. Applicants can usually receive cover until the age of 65 though some companies provide cover to the age of 80 with some restrictions.
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|
|AMP Flexible Lifetime Protection||$22.23|
|BT Protection Plans||$23.97|
|TAL Accelerated Protection||$24.07|
|AMP Priority Protection||$24.55|
|Asteron Life Complete||$27.72|
|Zurich Wealth Protection||$31.05|
|Policy||Cost per month|
|AMP Flexible Lifetime Protection||$35.67|
|BT Protection Plans||$39.46|
|TAL Accelerated Protection||$40.78|
|AIA Priority Protection||$41.52|
|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|
|AIA Priority Protection||$56.88|
|Zurich Wealth Protection||$60.68|
|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|
|AIA Priority Protection||$73.31|
|Zurich Wealth Protection||$76.51|
|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|
|AIA Priority Protection||$87.97|
|Zurich Wealth Protection||$89.40|
|Asteron Life Complete||$96.47|
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:
- Kidney failure
- Lung disease
- Medically acquired HIV
- Heart attack
- Open heart surgery
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|
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.
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. Premiumns can be levelled (same premium each year), stepped (rises each year but starts lower) or a hybrid (combinaiton of both).|
|Life cover bundle||Trauma cover that's combined with life cover|
Make sure you also consider your personal circumstance:
Look out for:
- 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.
Trauma Insurance is really worth considering for anyone that does not have the financial backing to deal with the costs that may be associated with suffering a Trauma condition. This may include:
- People with dependent families.
- People that do not want to burden friends and loved ones with the expense of a serious illness or injury.
- Executives and other key workers in a company that work under a high-degree of stress.
- Older people that may be more susceptible to suffering a condition.
- Young couples that had only recently married and are looking to protect their families future.
- People that already have life cover or income protection but would like to accommodate for the extra risk of a trauma condition.
- People that may have been unable to take out income protection due to the nature of their occupation or preexisting health conditions.
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
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:
Q. What is trauma insurance?
- A. Trauma insurance is also known as critical illness insurance or recovery insurance and pays a tax free benefit amount to be spent any way you choose if you are diagnosed with an eligible medical condition.
Q. How much trauma insurance is enough?
- A. The average policy is for between $100,000 and $500,000 but your cover amount will depend on your specific needs, your dependents and your debts.
Q. Do you need trauma cover in addition to private health insurance?
- A. Yes, you should consider cover even if you already have private health insurance because your health cover and the Medicare system will only cover some of the costs associated with treating critical illnesses and many health funds will have a gap where you still have to pay for a portion of your medical bills and medications. Trauma insurance will also cover your wages, pay your mortgage, pay for childcare costs for your family and pay for a nurse to attend to you at home while you recover, where Medicare and some health funds do not.
Q. Why take out trauma insurance?
- A. Medical traumas such as cancer, heart conditions and disability can happen to anyone at any time, and since you can never know what is going to happen, you should consider protecting yourself and ensuring you have the funds to access the best medical care if required, while also having the peace of mind that you'll have enough money to take care of your family and your debts if you do become ill.
Q. Are There Waiting Periods for Trauma Insurance?
- A. The waiting period on a life insurance policy is the period of time between when an actual claim is made and a benefit is provided to the insured.
It is worth noting that Insurance Companies in Australia apply a three month waiting period from policy commencement or the reinstatement of a policy for:
- Heart Attack
- Coronary Artery By-Pass Surgery
- Coronary Artery Angioplasty
- Coronary Artery Angioplasty Triple Vessel
As with most types of life cover, Trauma Insurance will not provide coverage for intentional self-inflicted injury or attempted suicide.
Trauma insurance can be a valuable addition to your insurance package, because the last thing you want to be doing when you find out you have a debilitating illness or you suffer a medical trauma, is worrying about money. Instead, trauma insurance gives you protection and peace of mind that your medical bills and other debts will be paid, so you can concentrate on recovering and spending time with your family.
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.