Trauma insurance (also referred to as critical illness) is a type of insurance that pays a benefit upon diagnosis of a listed medical illness. Listed illnesses vary from policy to policy, but many provide cover for cancer, heart attack and stroke, as well as many other illnesses and conditions.
What does Trauma Insurance Pay for?
Because a trauma benefit is generally payable to the beneficiary as a cash lump sum the benefit can generally be used for anything. However, when thinking of the amount of trauma insurance, there are a few common considerations. These can include;
- Medical costs – such as surgery and/or specialist fees.
- Supplementary income to pay ongoing bills if you’re off work
- Funds to pay out debt or other major expenses
- Funds to allow for modification to the beneficiaries’ home (i.e. if the illness leaves the beneficiary in a wheel chair and ramps or wider door frames are needed).
- Nursing and/or carer costs
What kind of illnesses are covered my trauma Cover?
Cancer, Heart Attack, Stroke and Coronary Artery surgery are illnesses that are commonly covered in a trauma policy. Other illnesses such as paraplegia/quadriplegia, advanced diabetes, coma, deafness, loss of limbs, loss of sight, loss of speech, multiple sclerosis, Parkinson’s disease and Alzheimer’s disease are examples of conditions that may be covered by a trauma policy.
It is important to note that trauma policies are all different and as such they may or may not include the above illnesses. This is where a financial adviser, who has experience in trauma insurance advice, can recommend a policy that is right for you.
How much does trauma insurance cost?
The premium you pay for your trauma insurance will be determined by the insurer, once they obtain certain details about you. Commonly your age, gender and smoking status will be used to ascertain your premium. Further, a health questionnaire may also be completed, and this may have an impact on the premium offered by the insurer.
It is worth noting that as you get older, your trauma premium will generally increase, if it is on a stepped premium. This is because as you age, statistically you are more likely to claim. If you wish, it is possible to ‘lock-in’ your premium for life, on a ‘level’ premium. A level premium will generally be expensive, compared with a stepped premium, initially. But over the life of your policy it can be cheaper, overall. Usually a financial adviser can give you a comparison, based on stepped or level premiums.
What’s the difference between Terminal Illness & Trauma insurance?
Terminal illness insurance and trauma insurance are sometimes confused, as they can be applicable in the same circumstances.
Terminal illness is a definition, usually found under a life insurance policy. This definition usually states that if, in the insurers opinion, the insured has less than 12 months to live due to an illness, such as cancer, the insurer will release the life insurance benefit, prior to the insured passing away. Conversely, under a trauma policy, there is no requirement for the insured to pass away. In fact, given today’s medical breakthroughs, a person who suffers a critical illness has a very good chance of living after diagnosis of a critical illness. However, they may have a continuing disability, i.e. suffered a stroke and lost some mobility or may require lifestyle change, i.e. leaving a stressful job after having a heart attack.
What’s the difference between health insurance and trauma insurance?
While it may be possible to claim on both insurances as a result of the same event, health insurance and trauma insurance vary quite substantially. Health insurance applies to the costs of health care and accommodation, i.e. hospital visits. These benefits are usually paid by the insurer, direct to the health care provider or reimbursed. Some benefits are capped, whereas some are not.
In comparison, trauma insurance is paid to the insured/beneficiary as a cash lump sum and there is no designated purpose for these funds. While a financial adviser may calculate the sum insured based on medical costs, time off work, debt etc. this calculation does not have a binding impact on how the funds are to be used, in the event of a claim.
So, in the event of a heart attack a person may claim on both their health insurance and trauma insurance. Their health insurance may cover hospital expenses and surgeon costs and their trauma insurance benefit may be used to pay out some debt and take some time off, to help with the recovery. The insurances generally work in conjunction with, rather than as supplement for, one another.
Can I pay for my trauma insurance through my super fund?
While other insurance cover may be held in your super fund, trauma insurance is generally unable to be, or advised not to be, held in your super fund. While there may be exceptions and ways to hold trauma in super, the general rule is you cannot.
Are trauma insurance premiums tax deductible?
Generally, trauma insurance premiums are not tax deductible, however in the event of a benefit, the benefit is usually tax free. You can confirm this with your accountant.
Want Tailored Advice on Trauma Insurance? Would you like to get a quote? Contact us on (07) 5437 9243 or at email@example.com for an obligation free discussion on suitable Trauma options for you.