BACK to BASICS: What is trauma insurance?

Trauma is ‘get better’ insurance. It provides a lump sum payment on the diagnosis of a serious medical condition to help pay for the best treatment and lifestyle changes, while you focus on healing.

Trauma insurance is the most common lump sum insurance payment for stroke, heart attack, cancer and many other serious conditions.

This cover differs from TPD cover as it is not assessed on your ability to return to work.

 

What is trauma insurance?

When you suffer a serious illness, the impact on your life is likely to be enormous. The financial impact can also be devastating if you’re not adequately prepared for it.

Trauma insurance provides you with a lump sum payment if you suffer an insured major medical trauma. The actual events covered vary between insurers, but some of the most common ones include:

  • Heart conditions.
  • Neurological conditions — dementia, motor neurone disease, Multiple Sclerosis, muscular dystrophy, paralysis
  • Parkinson’s disease and stroke.
  • Blood disorders — aplastic anaemia, medically-acquired HIV, occupationally-acquired HIV
  • Cancers and benign brain tumours.
  • Organ disorders — like chronic kidney/liver/lung failure, coma, loss of hearing/speech, major head trauma, severe burns.

Each of the above insured events is usually medically defined within the policy, and the definition must be satisfied to be eligible for a benefit payment. For example, it is not sufficient to simply be diagnosed as suffering from cancer, the type and severity of the cancer must meet the definition within the policy.

 

Do I need it?

Ask yourself some questions:

  • Would you have sufficient savings to cover large out-of-pocket medical bills?
  • Could you afford to reduce your working hours if you needed to recover from an illness or injury?
  • Could you afford for your partner to take some time off work to look after you?

If you answered no to any of the above, you may benefit from trauma insurance.

 

How will trauma insurance help me?

The payment of a lump sum from trauma insurance is designed to help you and your family obtain the financial support you need to get through a major illness without the financial upheaval.

 

Case study: Jenny & Paul

Jenny and Paul were both working full-time and earning a combined income of $160,000. With no children, they were working hard to build their nest egg and pay down their significant mortgage.

When Paul was diagnosed with a potentially life-threatening heart condition, his doctor told him he urgently needed surgery. He also faced the prospect of up to six months off work.

If Paul didn’t have trauma insurance, the couple would have to pay Paul’s out-of-pocket medical expenses on top of the mortgage repayments and everyday bills.

Fortunately, Jenny and Paul had spoken to their financial adviser about protecting their lifestyle in the event of sickness or injury. As a result, they had both taken out trauma insurance and income protection.

Paul’s heart condition was an insurable event under his trauma insurance — meaning the couple received a lump sum of $150,000.  Because he was unable to work, Paul’s income protection also paid him a monthly benefit equivalent to 75% of his regular salary until he returned to work.

This money helped the couple with their mortgage repayments, and pay all Paul’s hospital bills. It also allowed Jenny to take some unpaid leave to look after Paul at home.

This money can help you:

  • pay for the best medical care, both here or overseas
  • access the full range of rehabilitation services
  • pay for someone to come and help you around the house
  • change your lifestyle if required (e.g. reducing your working hours or taking an extended holiday).
  • help with mortgage repayments.

Insurance policies will often vary in their features and benefits, so you should work with your financial adviser to choose a policy that suits your needs and your budget.

 

What are the chances?

Cardiovascular disease (CVD) is the leading cause of death in Australia, with 43,603 deaths attributed to CVD in Australia in 2013. Cardiovascular disease kills one Australian every 12 minutes*.

To ensure you and your family’s financial future are protected, it is important to speak to a financial adviser about trauma insurance.

Chris Black is an award-winning financial planner based in Toowoomba who specialises in personal insurances including life insurance, income protection, total permanent disability and trauma insurance. To discuss your insurance protection needs, please email us at info@fortressfs.com.au or book online.

 

Written by Emma Linton Doig, Practice Officer at Fortress Financial Solutions.

 

*www.heartfoundation.org.au/information-for-professionals/data-and-statistics/Pages/default.aspx

Information on this site may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.

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