8 Questions to ask about trauma insurance

Written by Ronald Pratap

on April 7, 2020

Here we help you understand how Trauma insurance could help support you and your family, to allow you the financial freedom during the worst of times. This lump-sum payment can help you focus on receiving the best treatment available, pay for rehabilitation, and even cut back your work hours to be able to concentrate on your recovery.

If you have suffered a serious illness or major injury, trauma insurance can help ensure that certain medical emergencies don’t turn into financial crises, leaving you to focus on your recovery and time with your family.

In some cases Trauma insurance will pay out where other covers such as Income Protection and Total and Permanent disability are not eligible as was the case for 2 of my clients diagnosed with cancer who continued to work and the money was able to cover expenses that came up along the way,

  1. What is trauma insurance and what does it cover?

Also known as critical illness cover, trauma insurance covers specified serious illnesses and injuries that can be debilitating, and generally require extensive medical treatment.

It can cover injuries such as major head trauma, severe burns or permanent blindness as well as certain cancers, heart attack, stroke, Alzheimer’s and even major organ transplants. Keep in mind that different trauma policies can cover different conditions, and you also need to meet the severity criteria of the condition. This would be outlined in your product disclosure statement.

  1. Where can I get trauma insurance?

Trauma Insurance is offered by a wide range of life insurance companies and each company will vary with their product types and underlying features.

  1. Can I fund trauma insurance through my super?

Due to changes in the law from 1 July 2014, it is no longer possible to take out trauma insurance through your super fund.

  1. How much trauma insurance do I need?

It’s not pleasant to think about falling seriously ill or being badly injured, but life sometimes throws up unpleasant surprises. You can take a number of options into account when choosing your level of cover such as rehabilitation costs, medical expense, income replacement etc.

Please click on this link with some further information on the cost of a critical illness.

The true cost of critical illness in Australia

  1. How do I pay for trauma insurance?

When taking out trauma insurance you can choose between stepped or level premiums. With stepped premiums, the amount you pay in premiums increases each year as you get older. With level premiums, the cost of your cover is based on the age you were when you took up the cover. In general, if you select a level premium option, you should note that level premiums end at the Policy Anniversary before age 65 and will change to the corresponding stepped premium for your age after age 65 until your Policy expiry.

  1. What is Inflation Protection?

If you select Inflation Protection for your cover for either stepped or level premiums, the policy will increase with inflation to help it keep up with the rising costs of living. Inflation Protection adds incremental increases (usually 5%) to your sum insured; there will be an increase to your premiums as a result.

  1. How is trauma insurance paid out and how can you use the payout?

Trauma insurance is paid out as a lump sum for you to use in any way that you deem appropriate, giving you the financial freedom to focus on your recovery and getting back to work.

How will your family cope financially if you are no longer able to earn a stable income? And how will you pay for your recovery and the cost of medical expenses on top of your existing financial commitments?

Among the many things to consider are the kinds of savings, easily sellable assets (like shares) and back up plans you may already have in place to help you through an emergency.

You should also review any other insurance policies you may have, such as income protection or any other policy you may have that may include a rider or a linked critical illness benefit.

It’s important to make yourself aware of any other debts you have that you would need to cover in the event you fell seriously ill or were badly injured.

Other factors to examine can include how much money your family will need to cover costs on a day-to-day basis, as well as for bigger ticket items such as mortgage payments and educational expenses. Will this rise if, for example, your children go to university or the family needs a new car?

Among the many practicalities, worthwhile thinking about is whether your partner could step in and support the family if you were no longer able, or whether he or she will need to stop working to care for you.

If you do decide you need cover, it’s important to take the time to think about how much cover you can actually afford.

Some ways that people may use the payout include:

  • To cover medical costs not covered by a private health provider, including speciality therapy
  • As a form of income if you are no longer able to work
  • To cover the costs of moving into a new living situation as a result of the trauma
  • For debt repayment so your family is not left struggling
  1. What else should I know about trauma insurance?

Your insurance company will most likely request the medical records relating to the event or illness that has necessitated your claim. So, it’s important to keep these handy so you can receive the support you need as quickly as possible.

Dealing with a serious illness or injury is difficult enough without the added stress of finances. Trauma insurance can help ensure you can focus on your recovery and your family during this time.

If you’re interested in learning more about insurance, we can help. Get in touch by calling our Oran Park office on (02) 9188 1547.



The material shown in this article is for general information purposes only. It is not intended to be, nor should it be read as specific personal investment or risk advice.
Before acting on any of the information contained in this article you should obtain special advice from a specialist investment or risk professional, which is appropriate to your specific investment or risk needs, objectives and financial situation.
Whilst all care is taken in the preparation of this material, no warranty is given with respect to the information provided, and accordingly no responsibility for errors or omissions, including responsibility to any person by reason of negligence is accepted by RP Wealth Management.

Ronald Pratap

Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.

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