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Trauma Insurance Guides
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If you're suffering from a serious illness, or are recovering from a major injury, the last thing you want to be worrying about is money. Trauma insurance can make sure that doesn't happen.
That's because trauma insurance provides a one-off, lump-sum payment if you're diagnosed with a critical illness, or suffer a life-changing injury, so you don't have to fret about your finances.
It can be bought as a standalone policy, or as part of a wider life insurance package. We'll explain the differences in this guide, but both options provide similar cover.
You can spend the money however you like, whether that's to pay for medical bills, buy mobility equipment for your home, or even to cover the mortgage.
Compare trauma insurance quotes
You probably noticed that our table doesn't have the prices of each policy. Insurance quotes are based on a lot of factors making them all pretty personal. Hit the "Get Quote" button to get a tailored quote for your circumstances so you can start comparing!
A little tip before you begin, trauma insurance is usually sold as an add on to life insurance but you can buy it as a standalone. Something to keep in mind when you're getting quotes.
What is trauma insurance?
Trauma insurance, sometimes called critical illness insurance, pays a lump sum payment if you ever experience a major medical condition, whether that's illness or injury.
Not all medical conditions are covered by trauma insurance but common inclusions are cancer, heart attacks and strokes. Common injuries include major burns, loss of a limb or loss of sight.
Most trauma insurance policies will also pay out if your independence is severely impacted, whatever the cause. So if you're unable to use the bathroom, cook for yourself or shower, it's likely you'll receive a lump-sum payment which will help you adjust to your new lifestyle.
The financial benefit is tax-free and you can spend it however you like. You might want to use it to cover your medical bills, hire a care assistant or make your home accessible. Alternatively, you could use it to pay off the mortgage or take a much-needed holiday once you're feeling up to it.
An adviser can help you find cover from trusted life insurance brands.
- Get competitive quotes from multiple brands
- Lower rate of declined claims (according to ASIC)
- Save time and effort
How does trauma insurance work?
If you have trauma insurance, you pay a monthly or annual premium and, in exchange, you have a guarantee that you'll receive a lump-sum benefit if you experience a major medical condition.
The medical conditions covered may vary slightly between different insurers, but the specific conditions will be listed in your product disclosure statement (PDS). It's important to read this carefully before choosing which insurer you want to go with. If there's anything you're unsure of, call the insurance company directly to double check.
You can buy trauma insurance as a standalone product, or as part of a wider life insurance package, sometimes known as a bundle.
How do I find the best trauma insurance?
There is no "best" trauma insurance policy for everyone, because we each have specific needs and requirements. However, there are a few things to ask yourself when choosing a policy, as well as a few extra features to look out for.
| Feature | Questions to ask |
|---|---|
| Benefit amount | How much will the insurer pay you if you have to claim? |
| Coverage | How many illnesses and injuries does the policy cover? |
| Flexibility | Can you adjust your benefit amount if your circumstances change? |
| Waiting period | How long will you have to wait after you bought your policy, before you would be allowed to lodge a claim? |
| Indexation | Will the insurer lift your benefit amount in line with inflation? |
| Extras | Does your insurer offer helpful extras, like funeral cover or help with financial planning? |
| Support | Can you temporarily pause cover in times of financial hardship? |
How much does trauma insurance cost?
Various factors influence the cost of trauma insurance, including your line of work, smoking habits and chosen financial benefit.
To give you an idea of how much trauma insurance might cost you, we requested quotes from a range of major life insurers. Not many insurers offer trauma insurance by itself, so we requested quotes for a life insurance policy including trauma insurance and provided the breakdown price where possible.
| Non-smoking Bundled with life | Non-smoking Trauma cost breakdown | Smoking Bundled with life | Smoking Trauma cost breakdown | |
|---|---|---|---|---|
| NobleOak | $25.19 | $14.31 | $53.23 | $32.63 |
| ANZ | $31.30 | $13.59 | $57.81 | $28.53 |
| TAL | $38.30 | $22.29 | $83.06 | $48.14 |
| Qantas | $46.50 | $26.48 | $100.87 | $57.19 |
| Allianz | $29.07 | $11.31 | $58.26 | $26.01 |
| Zurich | $16.88 | N/A | $29.97 | N/A |
| MLC | $24.68 | N/A | $57.21 | N/A |
| AIA | $31.11 | N/A | $54.03 | N/A |
| OnePath | $30.42 | N/A | $54.84 | N/A |
*The above quotes were generated using a 35-year-old male taking out $200,000 life insurance. In the case of bundled insurance, it came with $100,000 trauma insurance attached. The price quoted is on a monthly basis.
Advantages of trauma insurance
Still deciding whether trauma insurance is a good idea for you? Here are some of the advantages:
- It's tax-free. The lump-sum payment you receive is tax-free. That means if you expect a $500,000 payout, that's exactly how much you'll get.
- It gives you money to get the treatment you need. A trauma insurance policy gives you the freedom to get the medical treatment you need without having to worry about costs.
- It can be put towards anything. Traditionally, trauma insurance goes towards paying for expensive medical bills, but it doesn't need to. You could just as easily use it to clear any debts you have, including your mortgage.
- It's one less thing to worry about. If you become seriously unwell, the last thing you and your loved ones want to be worrying about is money. Trauma insurance provides you with a lump-sum payment to help you adjust financially.
- It's often bundled with life insurance. A worthwhile tip: if you're also looking for life insurance, you can buy a policy with trauma insurance included. It can sometimes be cheaper than buying two separate policies, and means less paperwork for you and your beneficiaries to sort through.
- It pays out even if you're not working. Unlike TPD and income protection insurance, you can claim on a trauma insurance policy when you're not employed.
Disadvantages of trauma insurance
To find out if it's worth investing in something, you need to look at both the advantages and the disadvantages.
- Smaller benefit with bundled policies. If you buy a life insurance policy with trauma cover included, and need to make a claim for a critical illness, this is usually deducted from the overall amount you can claim from your life insurance. For example, if you claim $200,000 for a critical illness event, and have life insurance for $1 million, you leave your loved ones with $800,000 when your life insurance pays out. To avoid this, you might want to get two seperate policies.
- It doesn't pay out for every illness. Trauma insurance only pays out for critical illnesses like cancer, heart attacks, strokes, alzheimers and other major diseases. It doesn't cover all illnesses or accidents. If you only need to take some time off work due to stress, a back injury or other minor illness, income protection is a more suitable option.
- The medical costs might not be that much. There's a chance that the medical costs you incur will be far less than the payout. In some cases, your private health insurance and public hospital system will cover most of the costs. However, critical illness treatment can still put a serious strain on other areas of your budget, especially since treatment is often a long-term process. For instance, you may need to travel for treatment, or your partner or child may need to take time off work to look after you.
Standalone trauma insurance vs bundled
You can buy trauma insurance as a standalone policy, or bundled with your life insurance. The way you buy your trauma insurance may have an impact on any eventual payments.
Bundled policy
The amount you claim from your trauma insurance is deducted from the overall amount you can claim from your life insurance. So if you have life insurance for $2 million, and claim $200,000 following a trauma event, you would only receive $1.8 million if you later had to claim from your life insurance.
Standalone policy
If you have a standalone trauma insurance policy, and you have to make a claim, the policy will usually end. If you have other life insurance policies with the same insurer, but they are not bundled, those policies will be unaffected. You may be able to apply for another trauma insurance policy if you wish, but you are not guaranteed to be accepted.
What conditions are covered by trauma insurance?
Various cancers, heart conditions and strokes are generally covered by most trauma insurance policies. However, some insurers cover many more medical conditions, including:
- Alzheimers
- 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
Remember, specifics will vary between different insurance companies so always check your PDS to see which conditions are covered.
Is trauma insurance tax deductible?
No. Any premiums for trauma insurance are not tax deductible. This means that you can't claim back tax on the premiums you pay for a trauma insurance policy. Put simply, insurance premiums aren't tax deductible when the policy pays a benefit for physical injury. This means that all forms of life insurance, except income protection insurance, are not tax deductible.
Of course, this is different from the tax-free lump-sum payment you receive when a claim is paid out. You'll generally never need to pay tax on any financial benefit if you do ever have to make a claim.
Is it possible to have trauma insurance in super?
No. Trauma insurance in super hasn't been available since July 2014. However, if you were in a super fund that offered trauma insurance before this time, there's a chance you might have a policy. If you're not sure, give your super fund provider a call or check your member statement; this should tell you if you have trauma cover through your super.
Keep in mind that if you do have trauma insurance in super, the premiums will be coming out of your super, eating into your retirement fund, and in some cases, the payout won't be enough to cover all your medical bills and expenses. You can find out more information about life insurance through superannuation, and whether or not it's worth it, here.
Can I get child trauma insurance?
Yes. While nobody wants to think about their kids getting sick or suffering a serious injury, unfortunately, it happens.
Taking out trauma insurance for your child could give you a financial safety net so you can take time off work to be with them if they get sick. It could also help you pay for better medical care and ongoing rehabilitation.
Not all insurance companies have the option to add child cover to your trauma insurance policy, but the following table shows some brands that do.
| Brand | Child cover amount | Entry age for children |
|---|---|---|
| Guardian | $20,000 - $50,000 | 2-17 |
| AMP | $10,000 - $200,000 | 3-16 |
| AIA | $200,000 | 2-15 |
| BT | $200,000 | 2-14 |
| Clearview | $10,000 - $200,000 | 2-18 |
| CommInsure | $10,000 - $250,000 | 3-17 |
| Metlife | $50,000 | 1-16 |
| MLC | $10,000 - $200,000 | 3-18 |
| Onepath | $200,000 | 2-15 |
| Real | $20,000 - $50,000 | 2-17 |
| Westpac | $200,000 | 2-14 |
| Zurich | $10,000 - $500,000 | 2-17 |
| Virgin | $1,000 - $50,000 | Not stated |
What expenses can trauma insurance cover?
Trauma insurance can be a financial lifeline when you need it most. The money you receive could go towards:
- Immediate medical costs needed for treatment.
- Recovery costs, including rehabilitation.
- Paying off any personal debts including a mortgage, car loan etc.
- Covering your partner or child's income while they take time off to care for you.
- Updating or renovating your home, for example, if you need wheelchair mobility, a stairlift and disabled access in and out of your home.
- Accommodation and travel allowances for you and your partner or family member if you need to travel to a larger city for treatment.
Is trauma insurance worth it?
A serious medical condition can take a huge toll on your finances. Whether that's because you have to take time off work, pay for medical care, or even renovate your home to be more accessible.
Even if you do recover and are able to return to work, many people struggle to find employment again, or can't return to the same level of employment they held before their accident or illness.
When weighing up whether trauma insurance is worth it, ask yourself the following questions:
- Do other people rely on your income?
- How long could you survive on savings alone?
- Are you at a higher risk of illness or injury?
- Can you afford the monthly premiums of trauma insurance?
Hopefully, you'll never have to claim on your trauma insurance, but having a policy provides a financial safety net so you and your family have peace of mind.
Average cash savings of Aussies: $28,602
The average financial impact of a heart attack: $68,000
Australians at risk of chronic disease: 50%
Annual hospitalisations for injury: 460,000
How much trauma insurance do I need?
We can't tell you how much trauma insurance you need, but we can help you figure it out. When deciding how much cover is right for you, always take these factors into consideration:
- How long could you last on your savings alone?
- Do you have income protection insurance that can help replace lost income?
- Do you have private health insurance that may cover some medical expenses?
- Do you have significant debts, or a mortgage to pay off?
- Is your family dependent on you financially?
- Would you like to maintain a certain type of lifestyle?
How does a trauma insurance claim work?
If you are diagnosed with a critical illness like coronary heart disease, cancer or stroke, it should be covered by your trauma insurance policy. You can make sure by checking the covered medical conditions in your PDS.
When you submit your claim, you'll need to provide evidence that you've met the definition outlined in the PDS. Get your doctor to provide or complete the claim forms that your insurer will issue you. They'll be able to outline important details regarding your diagnosis. Once you've got all the information you need, you can submit your claim. In most cases, you should receive a one off, tax-free lump-sum payment to your nominated bank account.
One other important detail worth knowing: some policies come with partial trauma benefits. This is when you only receive between 10% and 50% of the sum insured when the diagnosis is not considered as serious or life-threatening. For example, if your total sum insured was $500,000, a partial benefit of 10% would give you $50,000 for something that doesn't require major medical treatment, like early stage melanoma. In most circumstances, the remaining sum insured ($450,000) would be there for you if your condition worsened.
What is the difference between TPD and trauma insurance?
Total and permanent disability (TPD) insurance pays a benefit if you are totally and permanently disabled. Usually, you have to prove that you are either unlikely to work in your own occupation, or any occupation, ever again.
On the other hand, trauma insurance will pay a benefit, regardless of whether the medical condition permanently impacts your life or not. However, it only covers specific conditions.
How is a trauma illness determined?
Insurers usually have a list of critical illnesses that they cover. You can find this in their product disclosure statement (PDS). For your claim to be successful, you'll need to provide medical evidence from your doctor proving that you have been diagnosed with one of the covered medical conditions.
Some insurers are stricter about their definitions than others. For example, if you were to suffer a major head trauma, there would need to be permanent neurological damage. Similarly, some insurers won't cover early stage cancers.
Bottom line: read the PDS before you buy a policy. It's boring, but it's worth it in the long run.
Frequently asked questions
Is trauma insurance tax deductible?
No. Any premiums for trauma insurance are not tax deductible. However, you do not need to pay tax on any financial benefit, if you do ever have to make a claim.
Is critical illness the same as trauma insurance?
Yes. Critical illness insurance is considered the same as trauma insurance. Remember, there will be some differences between individual policies.
How is trauma insurance different to health insurance?
Health insurance helps towards the cost of certain medical expenses. However, trauma insurance provides a lump sum which you can spend however you see fit.
Are there waiting periods for critical illness cover?
Yes. Most critical illness or trauma insurance policies have waiting periods. These may vary between different insurers and specific medical conditions, so always check your PDS.
What is a survival period?
A survival period is the length of time you must live from when your injury or illness occurs, to when your payment must be made. For example, you may have a survival period of 14 days. That means if you suffered a serious stroke, you would only receive a benefit if you lived for a further 14 days, at least.
Is child trauma insurance automatically included in cover?
Sometimes, there may be limited child cover included in your policy. However, it is more common to see child cover offered as an optional add-on, with more comprehensive benefits.
Is trauma insurance available through my super?
No. As of 1 July 2014, you can no longer buy trauma insurance through your superannuation fund.
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