What is trauma insurance?
Also known as critical illness insurance, trauma insurance provides a lump-sum payment if you suffer a serious medical condition.
How do trauma insurance policies work?
Trauma insurance covers for you serious illnesses, accidents or medical conditions. If you take out a policy and then develop an illness or condition that's covered under the policy you will receive a one-off payment that can be used to cover your medical costs, large debts such as a mortgage, and the cost of home modifications and professional care.
When am I eligible for a trauma payment?
To be eligible for a trauma insurance payout, your illness or injury must be one that is covered by your policy and while such conditions vary with insurers, the most common are cancer, heart attack, coronary bypass and stroke. The condition must also occur after what's known as the exclusion period.
What's on this page?
Bundled trauma insurance
- Cheaper (save on fees and stamp duty)
- Less comprehensive cover
Standalone trauma insurance
- More comprehensive cover
- Generally more expensive
If your bundled trauma insurance policy doesn't provide sufficient cover you might need to consider additional cover options such as Buy Back and Double Trauma benefit to ensure you have adequate trauma protection.
Most claims for a critical illness or injury are for either heart attacks, strokes or cancer, but there are others that may vary between insurers. This is why it's essential you compare your cover, or speak to an adviser about a policy suitable to your needs.
You have two types of policies to choose between when signing up for trauma insurance: a standard policy or comprehensive policy. Most insurers cover the same medical conditions but there is a chance it will vary due to different definitions.
Conditions that are covered
Here's a list of what is usually offered under standard and comprehensive policies.
|Standard policy||Comprehensive policy|
|The cheapest type of policy. It typically covers between 30–44 critical conditions, including the following.||Offers similar cover to a standard policy, but also provides cover for another 15 conditions. Here are some of them.|
One step you can take to find out what medical conditions are covered by your policy is reading your Product Disclosure Statement (PDS). This is the outline of your contract, and includes all included costs, benefits and exclusions. All insurers provide a PDS when you sign up for a policy.
The video guide to trauma insurance
You will need to make a claim. Here's an outline of the process:
To make a trauma insurance claim you'll generally need to follow this process.
- Fill out a claim form.This is completed by you, your doctor and any medical specialists involved. Your treating doctor will need to provide details of your condition and medical history.
- Provide identification. This could include an Australian passport, birth certificate and a driver licenses.
- Provide your original policy documentation. You'll need to show the original policy you were given or quote the policy number.
- Provide any further documents. This might include additional medical reports or investigations.
Understanding trauma insurance survival periods
The survival period is the amount of time a policyholder must survive before passing away, in order to receive a trauma insurance payment. Imagine, for example, a trauma insurance policy with a 14-day survival period. If the policyholder suffers serious trauma, is taken to hospital, and dies 12 days later the insurer will not pay out the policy. But if the policyholder passes away after the 14-day survival period (as a result of their injuries or illness) the insurer will grant the payout.
*This diagram is purely for illustrative purposes and is not indicative of all cases and policies.
What is the 90 day exclusion period?
Most policies also feature a 90-day exclusion period. This is standard to make sure you don't just take out trauma cover to make a claim for a condition you know you already have.
Under this exclusion, claims for many insured events will not be paid if the condition occurs or is diagnosed within 90 days of:
- The start of your policy
- The date of an applied-for increase in cover (but only in respect of the increase)
- The most recent date your policy was reinstated
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).
- Remaining medical bills, including out-of-pocket expenses.
- Rehab, if not already covered by health insurance
- A live-in nurse if you need it
- A holiday to take your mind off things
- Let you take time off work
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).
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
Average financial impact of a stroke
Average financial impact of a heart attack
Australians are prone to serious illnesses
Trawling for the best trauma insurance quote can be a time-consuming exercise, but it's critical to do your homework to find the best policy to meet your medical and budget needs.
There are a number of factors to think about before you sign on to a policy. Here's a guide on what sort of questions you should weigh up.
What are your included benefits?
It's important to compare what medical conditions are covered by insurance companies. Not all funds offer the same benefits for certain illness or injuries under trauma insurance, so you need to understand what is included, and if there are additional options that could enhance your cover.
Here are some built-in benefits to look for when comparing policies:
|Funeral Advancement Benefit|
|Terminal Illness Benefit|
|Future Insurability benefit|
|Waiver of Life Premium|
|Financial Planning Reimbursement|
|Suspension Cover Benefit|
What are the optional benefits of the policy?
Insurers may offer you other optional benefits to give you more comprehensive cover at an additional cost. There is a wide range of extras insurers offer, but the following are the most common.
|Optional benefit||What's covered?|
|Accidental Death Benefit|
|Business Future Insurability|
It's essential that you're clear on the benefits included in your policy, and any extras that could enhance your cover. By doing this, you'll have peace of mind that the policy is right for you and your family.
You never know what curve balls life will throw your way, so it can be hard to calculate the amount of critical illness cover you'll need. There are many unforeseen treatment and rehabilitation costs that follow a trauma or critical illness, so you need to understand how becoming a sufferer will impact your individual circumstance or family situation.
Think about your individual circumstance and family
There are personal and family factors you should consider when assessing how much trauma insurance you need. Here are some points to factor in.
- Affordability and income. Your policy depends on what you can afford. Weigh up how much you earn against your debts.
- Entitlements. You may also have other government schemed benefits like sick leave and workers' compensation that could fill some gaps with your policy.
- Your partner and other dependents. Your spouse or partner is the individual likely to be your carer, so take into account lost income on their behalf when deciding on the cover you need. It's also important to think about future finances for your children like university fees.
- Should I link any other policies? It could be a good option to link a salary continuance policy with your trauma insurance to provide up to 75% of your monthly income in the advent of a critical illness or injury.
Consider the levels of cover available
You have a choice between two types of trauma insurance policies to ensure you're covered for the costs linked to one or more conditions. This is achieved through a standard or comprehensive policy.
- Standard policy. The more affordable option. It takes into account 30–44 critical illnesses like heart attack, stroke and cancer.
- Comprehensive policy. More expensive but comprehensive. It covers the same conditions as a standard policy, and also around 15 other conditions like melanoma, diabetes complications and brain damage.
The costs of serious illnesses
Statistics show that suffering a trauma can amount to tens of thousands of dollars in someone's lifetime. A study conducted by Access Economics in 2009 revealed some staggering results.
Having a heart attack
- In 2009, heart attacks in Australia cost around AUD$15.5 billion.
- In 2003, the average cost to a sufferer was estimated to be around AUD$18,000 a year, and AUD$44,000 during their life.
Suffering a stroke
- In 2012, strokes totalled AUD$5 billion, with costs spent on productivity, medical treatment and carers.
- In that same year it was estimated stroke sufferers will spend around AUD$57,000 in medical and rehabilitation expenses during their life.
Cost of cancer
- In 2011, Cancer cost the community AUD$3.8 billion, while in 2006 a family's financial cost was AUD$47,000 a year.
- It's estimated a male smoker suffering lung cancer could see costs of AUD$200,000 for his medical treatment and rehabilitation.
Cost of diabetes in Australia
- Around 1.7 million Australians suffer from diabetes, and around 280 others develop the disease every day.
- Diabetes costs the community around AUD $14.6 billion a year.
Do I need a comprehensive policy?
There are some alarming statistics surrounding the likelihood of suffering conditions covered in a comprehensive policy. Australians live an outdoor lifestyle, and the increased exposure to the sun could mean you're more at risk of skin conditions like melanoma.
Here are some statistics compiled by Cancer Australia.
- In 2012, it was estimated that there were 12,036 cases of the skin disease.
- In 2013, there were more than a thousand deaths related to melanoma.
- In 2016, the number of sufferers is estimated to be around 13,283 people.
- There's a higher risk of contracting melanoma as you age.
Severe diabetes is covered in both types of policies, but a complication is normally only covered in a comprehensive policy. The disease poses a huge challenge to Australia's healthcare system. Costs to the community and sufferers are huge, and the likelihood of contracting the condition is on the rise.
The Australian Securities & Investments Commission (ASIC) offers the following advice to consumers purchasing or comparing trauma insurance
- Look for restrictions that might limit your cover such as those related to age, maternity leave, casual or part-time work and dangerous occupations.
- Make sure the policy is fully indexed so that benefits and premiums keep up with inflation.
- Be sure to answer all questions honestly in your application and declare any pre-existing medical conditions, to avoid having your claim rejected in the event of a trauma.
- Discuss trauma insurance with your partner and consider covering them as well, as a trauma suffered by either of you would have the same impact on your lifestyle and income.
- Know how much cover you will need by considering your financial assets and obligations both now and in the future.
- Before purchasing a policy, read the Product Disclosure Statement (PDS) carefully so that you fully understand what is covered and what it will cost you.
What are the most common types of Trauma Insurance claims?
According to Experien Insurance Services, by far the most common Trauma Insurance claim is for cancer (74%), followed by heart conditions (17%), stroke (5%), Parkinson's Disease (2%) and Multiple Sclerosis (2%).
Other conditions often covered by a Trauma Insurance policy include Alzheimer's disease, blindness, loss of speech, paralysis, chronic kidney failure, liver disease, lung disease, dementia, head trauma and major organ transplants.
Conditions where Trauma Insurance will only pay a partial benefit include benign tumours, osteoporosis, the loss of a single limb or eye, burns to less than 20% of the body and partial deafness or hearing loss in one ear.
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.
I have some more questions about trauma insurance
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|
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|
|Form of payment||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.
|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|
|Form of payment|
Regular payments (income protection)
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.