Trauma Insurance: Do I Need It?

Unsure if trauma insurance is right for you? Here's why you should consider TPD.

Trauma insurance was introduced into Australia in 1986, therefore it is a reasonably recent addition to the suite of personal insurances that are available on today's insurance market. It is sometimes referred to as critical illness insurance or recovery insurance. Trauma cover is essentially 'living' insurance, where you don't have to die before your beneficiaries are able to gain access to its benefits. Instead, you receive the cash lump sum payment if you are diagnosed with certain medical conditions.

Do I need trauma insurance?

Trauma insurance is for anyone who is looking for financial security from unforeseen medical expenses in the event of a serious illness. Cover can also address your inability to earn due to an illness.

What illnesses can trauma insurance cover?

There is a long list of medical conditions covered but the types of conditions change with different insurers. The most common illnesses include:

  • Cancer
  • Heart attack
  • Coronary bypass
  • Stroke

Although you could recover and live a healthy life once again, trauma cover claims have to be based on a severe condition at the time. It differs to income protection insurance in that it pays a lump sum payment on diagnosis, and the illnesses or injuries paid out on have to be specific medical conditions according to the policy. Medical conditions not mentioned will not be covered. Trauma insurance may therefore be the only option for people who are not employed.

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Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
Provides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.
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Product details Maximum cover Maximum Entry Age Cooling-off
(days)
NobleOak Trauma Insurance
NobleOak Trauma Insurance
Get a trauma benefit up to $2 million with cover for up to 37 medical conditions. $2,000,000 59 30 Get quoteMore info

Who is trauma insurance suited to?

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.

Life Insurance States Graph

The development of trauma insurance and its introduction to the market was due to the realisation that medical expenses can cause significant financial burden to every family especially those diagnosed with serious and terminal illnesses.

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. So if you feel that you are facing these risks then make this insurance your priority and enjoy the peace of mind of getting protected from your trauma insurance.

Trauma insurance can be useful if you have large debts

It is the type of insurance that is most valuable to people who have large debts such as a mortgage or business and are of pre-retirement age. A critical illness can be as financially devastating to a family as can the death of a breadwinner. As the inability to provide for the family anymore has the same effect. With trauma insurance you will be able to focus on recovery and not be held back with financial stress worries.

What are the features and benefits of trauma insurance?

The benefits of taking out trauma insurance are many as none of us know what awaits us in the future, but with trauma insurance in place you will at least have peace of mind in the knowledge that if the worst was to occur neither your family or yourself would suffer financially as a result.

Some of the obvious benefits include the following:

  • A stress-free holiday. The shock of diagnosis and recovery from any necessary operation can be eased when you can afford to take a restful holiday knowing your finances won't be over stretched when doing so.
  • Changing your old lifestyle to fit in with your new circumstances. Being informed by your doctor that you are suffering a serious illness can often mean you won't be able to live the same as you did previously. You may find you will have to reduce the hours you have been working. You may need to hire help. Whatever the changes may be at least you will have the finance available to do it.
  • Rehabilitation and ongoing medical care. Although Medicare, or your private health insurance, may have covered a lot of your medical expenses, there might be the opportunity of getting specialised care overseas, or the chance to be involved in a certain rehabilitation program. If you have sufficient individual funds available to take advantage of these opportunities you could recover faster and even extend you life expectancy.
  • Relieving day to day living pressures. Whatever your prognosis, your ongoing lifestyle will be improved dramatically if you have eliminated any financial stress from the equation. The last thing you want to worry about as you face your new future will be money. Trauma insurance can guarantee this can become a fact.
  • Create a financial back up plan. Having acquired trauma insurance will give you the confidence of going ahead with your plans for the future for you and your family. You will be able to rest assured that no matter what happens your plans will still be carried out and your whole family will be better off as a result.

How much trauma insurance do I need?

The amount of trauma insurance needed is a purely individual thing as all families are different. You will either have to make your own appraisal here or seek the advice of a financial adviser. The sort of things you will have to take into account however will depend on the following:

  • The amount of income you are earning now and what you will expect to earn in the future. If this income is to be lost completely or partially, it will need to be replaced. You will have to decide how this to be done. You could invest it to earn an income or you could add it to your savings and live off it.
  • The debts you can reasonably expect to hold at different stages into the future. All debts have to be repaid therefore if those debts were removed you would release more cash flow to more easily live on. You will need to ascertain the amount needed to pay off these debts.
  • The make up of your family. The number of dependants you are responsible for is integral to the amount of money you will need should you suffer from a traumatic event. Life must go on, therefore you will need to make money available to care for those you care for.
  • The number of assets you have in the form of property or shares. Some of these assets can be sold to make life easier for you. You will need to determine whether these assets are better sold or kept as security for later on in life. Once again a financial adviser is best placed to advise you on these matters.

Can I get trauma insurance with my life insurance?

Trauma insurance is a good supplement to your life or term life insurance. This is because as a policyholder you can benefit from financial freedom through receiving a lump sum payment when diagnosed with an illness listed on your policy. So if you want to be protected, select a policy that includes as many illnesses as coverage of your insurance plan. Trauma insurance claim can be availed if you survived the illness but in the event that you die, a term life insurance is applicable under this circumstance.

Consider your personal circumstances

It is important that you are able to look comprehensively into your options before you finally buy insurance package. You should also consider your present financial situation and your ability to take out insurance as well as your capacity to pay the monthly premium. Buy trauma insurance package that you can afford and not sacrificing much of your finances. If necessary, ask the help of an adviser who can shed light about your options.

Trauma insurance is important, just as important as life insurance. The main difference being that you will be alive to share the benefits with your family should you unfortunately suffer from one of the medical conditions listed as a traumatic event on your policy. It is truly a living insurance.

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Richard Laycock

Richard is the senior insurance writer at finder.com.au and is on a mission to make insurance easier to understand.

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