Trauma insurance offers a lump sum payment for serious illnesses but don't expect to receive a payment straightaway.
Trauma insurance provides a lump sum payment if you are diagnosed with a serious illness. Also known as critical illness insurance, this type of cover kicks in if you suffer a heart attack or stroke, are diagnosed with cancer or lose a limb. However, before you take out cover you should make sure you understand the 90 day exclusion period.
What is the 90 day exclusion period?
Most policies also feature a 90-day exclusion period. 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
What conditions are listed under this exclusion period?
Conditions typically listed under this 90-day exclusion are angioplasty, coronary artery bypass surgery, cancer, heart attack, stroke, carcinoma in situ, leukaemia, adult onset insulin-dependent diabetes mellitus diagnosed after age 30 and early stage prostate cancer.
Is it possible to waive this exclusion period?
Some insurers will waive this three-month period if, if you transfer from an existing policy and immediately prior to the commencement of cover, you were covered for the same specified trauma events on the policy you're transferring from.
What general exclusions are applied to Trauma Insurance?
Some typical exclusions applied to Trauma Insurance include;
- Benefit will not be paid for death from suicide within the first 13 months of the commencement or recommencement of the policy
- Benefit will not be paid for any trauma event directly or indirectly, wholly or partially caused by intentional self-inflicted injury
- Benefit will not be paid for any crisis event not listed on policy
When will a Trauma benefit be paid?
In order for a trauma benefit to be paid, you’ll need to be diagnosed with one of many specified conditions. Most policies offer a broad range of cover for somewhere between 30 and 50 medical conditions, with differences present from policy to policy.
Major conditions covered under most policies include heart attack and other forms of heart disease, stroke, head trauma, loss of limbs, quadriplegia and cancer. Other conditions commonly covered include kidney failure, paraplegia, major organ transplant and the loss of sight.
Trauma insurance policies will generally pay out on the diagnosis or survival of a traumatic event, depending on your specific illness or injury. The survival period is most commonly classified as being between one and two weeks.
The insured event has to occur after your cover starts and before it ends, but insurance providers will not pay out if the trauma condition was intentionally caused by you.
As the list of conditions that will qualify you for a benefit payment differs from one insurance provider to the next, it pays to examine the PDS closely and determine exactly which trauma events each policy covers.
Trauma Insurance Underwriting
Although the process of underwriting trauma insurance is basically the same as for other forms of life insurance a few key differences do apply. While term life insurance, TPD cover and income protection all include cover for accidents, trauma insurance is designed to cover major illnesses.
As a result, dangerous pastimes (for example motorbike riding) and occupations that regularly expose you to hazardous situations will not play as big a part in the underwriting process as they do when you apply for other forms of life insurance. There are exceptions to this rule where your hobbies or job could make you more prone to suffering certain illnesses, but this is generally not the case.
In addition, your family’s medical history can actually have more of an influence when it comes to underwriting a trauma insurance policy than it would on TPD cover. This is simply because there are many illnesses that could result in a trauma insurance claim but would not be sufficient to meet the conditions of a TPD claim.
Finally, insurance providers will also take a slightly different approach to certain existing injuries when underwriting trauma insurance. Some existing injuries, for example back problems, could be excluded from income protection or TPD policies, but this would not be the case with trauma insurance cover.
When looking for trauma insurance cover, make sure to do your research and compare your available options. Read every PDS closely to ensure you understand what is and isn’t covered under each policy, and seek expert help from an insurance consultant to get advice tailored to your individual needs.