What is trauma insurance?

What is trauma insurance?

Trauma insurance, also called critical illness insurance, gives you a one-time payment if you have a major illness or injury. It is intended to help you cover your living expenses while you recover from your illness or injury, as well as costs associated with your rehabilitation, such as medical bills, therapy, etc. There are generally no restrictions on what you can spend the pay out on. Additionally, trauma payout does not generally attract tax.

Let’s look at trauma insurance in greater detail, including what it covers, how it compares to TPD and life insurance, and what you need to consider when taking out a policy.

What does trauma insurance cover?

A trauma insurance policy can cover: 

• Various forms of cancer
• Heart conditions, i.e., heart attacks, surgery, etc. 
• Organ disorders and failure, including transplants
• Major head injuries
• Neurological conditions, e.g., strokes, dementia, and Alzheimer’s
• Blindness
• Loss of hearing
• Loss of speech
• Loss of limbs
• Severe burns
• Intensive care treatment

The exact illnesses and injuries covered depend on your serious illness insurance policy and will be outlined in your product disclosure statement (PDS). Additionally, to successfully make a claim, your condition must meet specific severity criteria, which will also be detailed in the PDS.

How much trauma insurance cover do I need?

Your amount of trauma insurance cover refers to the size of the lump sum payment you’d receive if you needed to make a claim. Several factors help determine how much trauma insurance you’re likely to need: 

• What are your monthly outgoing, and what kind of expenses would you need to cover? More specifically: 
  • How much are your mortgage or rent costs?
  • Do you have any dependents? What related expenses will you need to account for in the future, e.g., university fees?  
  • Do you have any outstanding debt, and how much?

It’s also important to note that after contracting a critical illness or suffering a serious accident, you’ll have outstanding medical bills and increased medical expenses in the future – so your cover must account for that.  

• How much do you have in savings, investments, etc? 
  • Do you have any alternative forms of income? 
  • How much financial support could you expect from your familiar if the worst were to occur? 

The less secure your financial safety net is, the more trauma insurance cover you’ll likely need.

• What other insurance policies do you have? If you have 

Health insurance, for instance, will help pay your medical expenses, while income protection insurance could help replace your lost monthly salary.

Trauma insurance vs TPD insurance

Let’s examine the differences between trauma insurance and total and permanent disability (TPD) insurance.

• Policies

A trauma insurance policy is paid out if you suffer a serious accident or illness, regardless of your chance of recovery and ability to work. Subsequently, it can be used to cover the cost of your recuperation and rehabilitation. In contrast, TPD insurance is if you become permanently disabled and can’t return to your or any occupation.

• Benefits covered

Both trauma insurance and TPD insurance issue a one-off, lump sum payment if your claim is successful – in contrast to an income protection policy, for instance, that pays a monthly income.   In the event of a claim there are generally no restrictions on what you use the funds on. However, here are some of the most common benefits of trauma insurance are used to cover:

• Medical bills
• Ongoing medical expenses (which can include those not covered by your health insurance)
• Living expenses, such as mortgage or rent, bills, food, and debt payments. 

Additionally, trauma insurance can pay the rehabilitation expenses associated with your recovery and get back to a state where you can resume your professional. TPD covers permanent disability and provides financial support for lifestyle changes and necessary home modifications.     

Can an individual claim trauma and TPD insurance?

Yes, an individual can purchase both a trauma insurance policy and a TPD insurance policy. If you buy both, it’s best to take out a TPD insurance policy that fills in all the gaps left by your trauma insurance policy, i.e., conditions, level of severity, etc. 

Let K Partners help you with your Trauma Insurance

K Partner’s skilled team has decades of experience advising clients on taking out the best insurance coverage for their particular needs and circumstances. Our detailed knowledge of the insurance landscape puts us in the ideal position to review your current insurance coverage, recommend additional policies based on your needs, and help secure discounts on existing insurance premiums where possible.

For expert, impartial advice on trauma insurance or any other aspect of income protection or financial planning, contact us to book your consultation.

Please note that all the while the information provided above is factual in nature, it’s also intended to apply generally, and to a broad audience. Subsequently, the information hasn’t taken your personal circumstances or goals into consideration.

Trauma Insurance FAQs

Trauma insurance vs life insurance – is there a difference?

Trauma insurance is different from life insurance. Trauma insurance pays you a lump sum payment if you’re seriously ill or injured to help you potentially recover and return to work. Life insurance, conversely, is a policy that pays a lump sum to a designated beneficiary, e.g., your family, in the event of your death.

Can you get trauma insurance for children?

Yes, it is possible to get child trauma insurance, also known as child cover. In the event a child suffers a serious accident or becomes critically ill, one of their parents often gives up working to care for them. The lump sum, or, in some cases, a monthly benefit provided by the child trauma insurance policy replaces their parents’ lost income and pays for their medical care and rehabilitation. 

What is the disadvantage of trauma insurance?

If there is a downside to trauma insurance, it’s that it only covers specific illnesses and injuries as per the policy’s PDS. For example, mental health conditions are a notable omission from many policies, even though they may prevent an individual from continuing their occupation.

What is considered a trauma accident?

A trauma accident is generally considered one that results in a serious injury, such as head trauma, a lost limb, loss of sight or hearing, severe burns, etc. Additionally, you can claim trauma insurance for an illness, such as cancer, heart conditions, and neurological conditions like dementia. 

Is trauma cover worthwhile?

The general answer to whether it’s worth taking out a serious illness insurance policy is yes. This is because life is unpredictable, and trauma insurance helps protect you against a range of unfortunate events. However, whether trauma cover is worthwhile for you depends on your personal circumstances. For instance:

• Do you have any other savings or investments to fall back on if you fall ill or are seriously hurt? 
• Do you have dependents, i.e., a family, that will need to be supported if you can’t work for an extended period – or ever again? 
• What expenses would you need to cover? Namely, mortgage or rent, living expenses, and debt – to say nothing of your medical expenses? 
• Do you have a dangerous occupation or hobbies? 

Seeking professional financial adviser will help you determine whether to purchase trauma insurance and the amount of cover you’ll require. Which points should I pay attention to in trauma insurance policies?

The main details to pay attention to when choosing between trauma insurance policies are which illnesses and injuries it covers. More specifically, look at the severity criteria for each condition to get an indication of how difficult it will be to make a successful claim.  

Is trauma insurance the same with critical illness insurance?

Trauma insurance is also called critical illness or recovery insurance.