Major Illness Insurance (Trauma)
What is Trauma Insurance Cover?
Trauma insurance cover or critical illness insurance provides a lump sum of money to cover immediate medical expenses and other financial needs when a critical illness or injury occurs. Trauma cover pays a agreed amount to cover you for many different issues such as heart attacks or intensive care.
A serious illness or injury causes more than just physical and emotional turmoil – it has the potential to cause severe disruption to your finances as well. While income protection helps to replace a portion of your income when you cannot work due to illness or injury, it’s useful to have a lump sum of money to cover your immediate medical and financial needs. This is where trauma insurance comes into its own. So you can get on with recovering and getting on with life, without worrying too much about your finances.
What types of conditions are covered under Trauma?
The conditions that you can insure yourself for will vary from policy to policy, but will typically include as standard various cancers, heart disease and/or heart attack, and stroke.
Beyond these common diseases, there are several dozen other conditions that may also be included. Some examples include major burns, organ transplant, and motor neurone disease. The product disclosure statement (PDS) for a policy will detail what conditions are covered.
Our article on what trauma insurance covers provides a more detailed list of just a few of the things that may be covered by a policy:
How much trauma cover should you have?
The amount of trauma cover you should have will depend upon both your family and financial situation. As previously mentioned, your income protection policy will be your main source of ongoing cashflow, so your trauma insurance is designed primarily to provide for your short-term needs.
As a basic guide, a trauma insurance policy may be used to:
- Provide a lump sum for immediate medical needs involved in treatment and recovery.
- Pay off any personal debts such as a mortgage.
- Provide a cash buffer.
For a purely hypothetical example, here’s how that might work in practice:
Jane, aged 32, is married with two small children. She and her partner have a mortgage with an outstanding balance of $150,000, and a car loan of $30,000.
Jane works full-time, earning $65,000 per year as an account manager. Jane has income protection insurance that could cover the mortgage and daily expenses if she were off work. But she also wants peace of mind that if she were to suffer a major medical illness or injury, she and her partner could continue to afford their lifestyle while she was off work.
As such, she has calculated her trauma insurance needs as follows:
$30,000 – immediate lump sum for medical costs
$150,000 – mortgage repayment / cash buffer
$30,000 – car loan repayment
Jane calculates that with trauma cover of $210,000, her 75% income protection policy would then be sufficient to replace her existing cashflow while she was off work.
Please note this is just an example – the needs of each person will be different. As an information provider, CANSTAR only provides general advice and does not take into account your objectives, financial situation, or needs. You should talk with a financial adviser about your specific and individual needs.
How much does trauma cover cost?
The following premiums are current as at our 2016 Advised Life Insurance star ratings. Monthly premiums have been rounded to the nearest dollar.
|Trauma (Male – Stepped)
Monthly Premiums ($/month)
|Trauma (Female – Stepped)
Monthly Premiums ($/month)
|Source: www.canstar.com.au Average premiums current as at 17 August 2016. Average premiums have been rounded to the nearest dollar.|
To find out more about getting trauma insurance cover from a financial adviser and to compare your options, read Canstar’s annual Life Insurance Star Ratings report.
1. This advice is general and has not taken into account your objectives, financial situation, or needs. Consider whether this advice is right for you. Consider the product disclosure statement (PDS) before making any financial decision. For more information, read Canstar’s Financial Services and Credit Guide (FSCG).
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