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Trauma Insurance: What Is It & Should You Get It?
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Trauma Insurance: What Is It & Should You Get It?

Katie Douglass

Katie Douglass

26/03/2021 • 4 minute read

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When facing a serious illness or major injury, the last thing you want to be stressing about is money. Whether it’s to take time off work, pay for medical expenses, or even access mobility equipment for your home, a serious medical condition or injury can take quite a toll on your finances. This is where trauma insurance could come in handy.

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Did you know?

According to the Heart Foundation, the average cost of a heart attack to an individual and their family is a staggering $68,000.

Below, we’ve put together a handy guide on trauma insurance to help you understand what it is, what it covers, and how to compare policies.

What is trauma insurance?

Trauma insurance, also known as ‘critical illness’ or ‘recovery insurance’, provides a one-off lump sum of money in the case of a critical illness or serious injury. While not all medical conditions are covered under trauma insurance, the most common inclusions are cancer, heart attack, coronary bypass surgery, or stroke. Generally, the money is used to cover medical expenses and other financial needs but you can spend it however you like and it is tax-free.

What could trauma cover help pay for?

  • Out-of-pocket medical expenses
  • Everyday living expenses for you and your family
  • The cost of treatment or rehabilitation
  • Purchase mobility equipment for your home
  • Pay for renovations or modifications to your house
  • Pay off debt including mortgages

What does trauma insurance cover?

While common conditions such as cancer, heart attack, and stroke are often included in trauma insurance, what is covered under your policy will vary between providers. To get an idea of what might be included, here’s a list of medical conditions some insurers cover:

  • Alzheimers
  • Blindness
  • Kidney failure
  • Leukemia
  • Loss of hearing
  • Loss of limb
  • Speech loss
  • Major brain injury
  • Major organ transplant
  • Motor Neurone Disease (MND)
  • Multiple Sclerosis (MS)
  • Parkinson’s Disease
  • Quadriplegia
  • Terminal illness
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Tip

To understand what is and isn’t covered under a trauma insurance policy, have a read of the Product Disclosure Statement (PDS). A PDS will explain in full detail which medical conditions and injuries are covered and under what circumstances. If you’re ever in doubt, get in touch with the insurance provider to double check.

Is trauma insurance worth it?

While trauma insurance might be right for you, it might not be right for some. If you’re weighing up whether to get trauma insurance, here’s a few questions to ask yourself:

  • If you’re unable to work for a certain period of time, how much income would you and your loved ones need?
  • Are your loved ones financially dependent on you?
  • Do you have any debts (i.e. a mortgage) to pay off?
  • Do you have enough private health cover to pay for some medical expenses?
  • Are there any savings or assets you could use to cover expenses and will it be enough?
  • Are you a contractor or self-employed? If you’re not an employee, it can be hard to get cover under income protection insurance.

Important

For professional advice on whether to get trauma insurance and for how much, it’s best to speak to a qualified financial adviser.

How much does trauma insurance cost?

Unfortunately, we can’t tell you exactly how much your trauma cover will cost as it varies from policy to policy. There are key factors including your age, gender, pre-existing health conditions, and smoking status that will affect the cost of your policy. For example, if you are a regular smoker the cost of your insurance will likely be higher than someone who isn’t a smoker.

In addition, the type of premium you choose to pay for your insurance will have a big impact on how much your policy will cost. There are two types of premiums to choose from — stepped premiums and level premiums:

Stepped premiums

Stepped premiums are premiums that are recalculated at each policy renewal date. Generally, they increase each year based on the likelihood of a claim being made as you get older.

Level premiums

Level premiums are often higher at the start of your policy but they generally remain the same or increase slowly during the life of the policy. Any changes to your premiums aren’t based on age, but rather on factors such as inflation or insurer fees.

How do I find the best trauma cover?

There’s no one-size-fits-all answer when it comes to the best trauma cover as everyone has their own unique needs and requirements. However, there are a few key factors to consider when comparing policies. These include:

Benefit amount How much will the benefit be when you make a claim?
Coverage Which medical illnesses and injuries are covered under the policy?
Waiting periods After you’ve purchased your policy, how long do you have to wait before you can make a claim?
Extras What extras are included in the policy (e.g. funeral cover, financial planning assistance)? What built-in benefits does the policy offer?
Exclusions Are there any events or circumstances (e.g. pre-existing conditions) in which you will not be covered?

What is the difference between trauma insurance and TPD?

Trauma insurance and total and permanent disability (TPD) insurance often get confused for one another. TPD insurance differs from trauma insurance in that it provides a lump sum amount if you are totally and permanently disabled. Usually, with TPD insurance you have to prove that you are unable to work in your occupation or any other occupation as a result of a serious injury or illness.

Looking for more info on income protection?

Check out more of our articles here.

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Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.


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Katie Douglass

Written by Katie Douglass

Katie Douglass is the Communications Manager at Oiyo and a writer. In recent years, Katie's work has appeared in publications such as Marie Claire, InStyle, and THE ICONIC. She has a Bachelor of Creative Industries in Fashion Communication & Journalism from the Queensland University of Technology. At Oiyo, Katie is responsible for overseeing editorial strategy.

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