Written by Trauma cover is a type of life insurance which can offer cover if you fall critically ill or suffer from a significant injury. It can be suitable for more immediate incidents or diagnoses, but also for longer-term conditions such as Alzheimer’s disease or Parkinson’s disease. If your condition is deemed claimable by your insurer, you can be paid a lump sum on diagnosis to help you cover the immediate cost of getting back on your feet, such as medical expenses and other financial needs, and focus on your recovery.
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What is covered by trauma insurance?
Trauma insurance policies can include a wide array of critical illnesses or serious injuries, though these may vary between policies and are subject to your insurer’s terms and conditions. Some of these can include:
- Heart conditions: heart conditions are common in later life, with about 1.2 million Australians suffering from a heart-related issue. Trauma insurance can offer cover for a range of heart conditions, including heart disease, heart attacks, open heart surgery and cardiac arrest.
- Cancer: your policy may be able to give you or your loved ones the necessary financial support to allow you to recover without concerns surrounding your finances. However, not all types of cancer will be covered, so it’s important to check with your insurer before you buy your policy so you can be aware of what is and isn’t covered.
- Major organ transplants: if you have a major organ transplant due to a specific organ failure, trauma insurance may be able to cover you so you can focus on the road to recovery.
- Stroke: your chances of suffering a stroke increase the older you get. If you suffer a stroke, you’ll likely be out of work for a long period, so it’s important to know that your policy may offer protection in this area.
- Paralysis or loss of limbs: if you’re involved in an accident which leaves you partially or fully paralysed or without one or more of your limbs, trauma insurance may be able to cover it.
- Severe burns: if you’re involved in an accident which causes significant burns, your trauma insurance can cover you, such as costs related to skin grafts.
- Alzheimer’s: while early-onset Alzheimer’s might not render you unable to work immediately, you will eventually need to retire as the disease progresses. Trauma insurance can cover you and give you the financial assistance you need.
The amount you’re paid will be agreed upon when you take out your policy, with some insurers offering up to a maximum of $2 million worth of coverage. The amount you’re insured for can have a direct impact on the cost of your insurance; for instance, if you choose a larger sum, your premium will likely be higher than it would be for a smaller insured sum.
What’s not included in trauma insurance?
When taking out trauma insurance, it’s important you’re aware of specific exclusions and situations where your claim may be rejected. These may include:
- Self-harm or suicide: serious injuries or critical illnesses as a result of self-harm typically won’t be covered by trauma insurance policies. Death or disability as a result of an attempted suicide may also be excluded. However, similar to other life insurance policies, a suicide clause may be in place and stand for the first 13 months of your cover, after which it may be covered.
- Failure to disclose a pre-existing medical condition: if you don’t disclose a pre-existing medical condition to your insurer, you could have a claim related to that condition rejected.
- Events occurring within a waiting period: these policies may have a waiting period in place at the beginning of your cover. For example, with some insurers, you may not be able to claim for cancer or heart attack within the first 90 days of the policy being in place.
It's crucial to be fully aware of any exclusions which may apply to your policy, which is why it’s essential to compare offers and read PDS documents so you can be clear on what you are and aren’t covered for.
What’s the difference between trauma insurance, total and permanent disability (TPD) insurance and income protection insurance?
It’s important to be aware of and understand the differences between different types of life insurance. The differences between trauma, TPD and income protection cover are the following:
- Trauma insurance: this cover pays out on diagnosis of a serious illness such as cancer. This cover is paid out through a lump sum amount, which may be up to $2 million with some insurers. Trauma cover is not available in your superannuation, unlike many other forms of life insurance.
- TPD insurance: this can provide you and your loved ones with cover if you’re permanently disabled and unable to work ever again, either in your current job or any position suited to your education and qualifications. This also comes with a lump sum payout, with some insurers enabling claim limits of up to $3 million to $5 million.
- Income protection insurance: under this type of insurance, you can be covered if you’re temporarily unable to return to work due to illness or injury. Unlike the other two types of insurance, you can claim an ongoing benefit of up to 70% of your salary (subject to your insurer’s terms and conditions) for an agreed period.
The pros and cons of trauma insurance
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What factors influence the cost of trauma insurance?
Your age
As you grow older, you’ll become more susceptible to illness and serious injury. Insurers will take this into account when calculating your trauma insurance premium, with those more advanced in age typically paying more for coverage.
Your job
If you work in a higher-risk field, such as a telephone linesman, your insurer may deem you as being more likely to be seriously injured. Applicants who work office jobs are less likely to have their careers influence their premiums, as the risk of injury or illness is far lower in these occupations. Some riskier professions, such as truck drivers, may not be able to be covered, although this will depend on their overall risk profile and their insurer's terms and conditions.
Your medical history
Pre-existing health conditions or a history of repeated illness or injury will also impact your trauma insurance premium. If the insurer determines that your pre-existing health condition may increase the likelihood of you having to make a claim, they may exclude that benefit or apply a loading to your policy.
Your family’s medical history
If your family has a history of critical illness, you may be deemed at a greater risk of eventually being diagnosed with a serious condition by your provider.
Whether you smoke
Being a smoker makes you more prone to many diseases or illnesses which may be included under trauma insurance cover. As a result, your insurer may set your premium at a more expensive level to compensate for the greater risk you pose as an individual.
Your insured sum
By opting for a larger insured sum, you’re likely to pay more for your insurance policy than someone of the same profile as you, but with a smaller benefit.
Top tips for comparing trauma insurance with Savvy
Frequently asked questions about trauma insurance
Level and stepped premiums are the two choices you can generally make when purchasing life insurance. The differences between them are:
- Level premiums: by choosing level premiums, your payments will largely remain the same and only increase when your insurer opts to raise their premium rates. By choosing level premiums, the cost at the beginning may be more expensive, but it could be cheaper when you’re older.
- Stepped premiums: a stepped premium can be considerably cheaper initially than level premiums. However, the cost will increase year on year as it’s influenced by your age and choice of policy. Before taking out a stepped trauma insurance premium, make sure you account for the increasing costs and ensure you can afford it in the long run.
Yes – how you spend your money is up to you. Your trauma insurance lump sum can go towards any debts or bills you have to pay, including your mortgage.
When breaking down if you need trauma insurance, you should consider the following:
- The lump sum amount you and your family would need if you were out of work for a long period.
- If you have private health insurance, consider how much of your medical expenses it could pay for.
- Should you have income protection insurance, this could contribute to your financial needs if you’re critically ill or seriously injured.
- The support available to you from family and friends, both financially and physically (such as taking care of your kids).
No – trauma insurance is no longer available through your super fund. However, if you’re with a super fund which used to offer trauma insurance, you may find you are still covered. Check your member statement or contact your super fund if you’re unsure.
There are certain situations where some insurers may be able to approve your claim if you’ve tested positive for COVID-19. For example, if you contract the virus and it either results in one of the conditions covered by your policy or you’re hospitalised in intensive care, you may be able to make a trauma insurance claim. It’s important to check with your insurer and familiarise yourself with your PDS to make sure you’re across what is and isn’t covered under your policy.
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