If you suffered from a serious injury or illness would you and your family be able to live without your income?
Would you be able to cover your medical and rehabilitation costs?
If you answered no, or you’re not sure - you should consider trauma insurance. Here’s what you need to know to find the right policy for you.
What is trauma insurance?
Trauma insurance is a type of life insurance that pays out a lump sum if you suffer a serious illness or injury.
It covers cancer, stroke, head injuries and other serious illnesses and/or injuries and is also known as recovery insurance.
When you take out a trauma insurance policy, you’re required to pay premiums.
These are regular payments to your insurer who in return will guarantee to pay out under your policy in the event of injury or illness.
What does trauma insurance cover?
A trauma life insurance payout can be used for whatever you need it for. Usually, this includes:
- Living costs
- Medical care
- Special transport requirements
- Changes to housing
- Rehabilitation
- Loss of income if you’re unable to work
- Other financial requirements as a result of your illness or injury
Each insurer may cover different illnesses and injuries with their policies but the following are often included:
Injuries
- Loss of limb
- Serious burns
- Brain injury
- Open chest surgery
- Loss of hearing or sight
- Loss of speech
- Quadriplegia
Illnesses
- Cancers
- Coma
- Dementia
- Alzheimer’s
- Parkinson's disease
- Motor neurone disease
- Heart disease
- Stroke
- Liver failure
- Kidney failure
- Lung failure
- Muscular dystrophy
Cancers and heart diseases make up the vast majority of trauma insurance claims. Cancer Council data shows that one in two Australians will be diagnosed with cancer at some stage in their lives.
Conditions covered by trauma insurances differ between insurers and policies so always make sure you understand what’s included before making a decision.
Speak to your broker/advisor or check the policy’s product disclosure statement to make sure you know what you’re covered for.
Do you need trauma insurance?
A serious illness or injury may cost much more than you’d expect.
You may be unable to work, you may require specialist care, and you might even need to make changes to your home to make it more accessible.
When considering trauma insurance there are a few key questions you should ask yourself:
- Am I likely to make a claim?
Generally speaking, the older you are, the more likely you are to make a claim.
If you’re under 30, healthy, with no debts or dependents, and don’t work in a high-risk profession you may not need trauma insurance.
- Do people depend on me and my income?
If you have children, a partner, parents or friends who depend on you and your income trauma insurance will help take care of them if something happens to you.
- Could I afford my care if something happened?
If you don’t have the savings required to cover the extra costs that might be associated with injury or serious illness, trauma insurance may be a good idea.
- How about my existing insurance?
Before seeking out a trauma insurance policy always take a close look at your existing insurance policies as they may include some trauma cover or income protection.
- Do I have debt?
If you were to be unable to earn an income would you be able to cover your debt repayments? If you’re unsure, trauma insurance may be a good solution.
- Do I have support available?
Consider whether you have other support available through family, worker compensation or government benefits.
- Can I afford the premiums?
Paying your insurance premiums should not cause you financial stress.
How to buy trauma insurance
You can buy trauma insurance from most major insurers in Australia. It’s up to you whether you arrange your trauma insurance:
- Directly from a life insurance company.
- Through a broker.
- Through an arrangement with your employer.
- Or through your superannuation scheme.
You can usually get a quote and buy trauma insurance online in less than 30 minutes, but you’ll need to provide certain information. That might include:
- Age
- Medical history
- Profession
- Family medical history including any history of illness or disease
- Lifestyle, including whether you’re a drinker and/or smoker
- Details of any high-risk hobbies such as extreme sports
With any insurance, it’s essential that you answer questions honestly and comprehensively as if you omit any details your insurer may deny your cover or deny future claims.
Some insurers may also require you to undergo a medical assessment in person, depending on your age and medical history.
Don’t assume a long application is a bad thing - insurers who ask fewer questions may have more policy exclusions.
The cost of trauma insurance
Every trauma insurance policy is different and will have different monthly premiums.
The factors that affect the cost of your premiums usually include:
Policy details affecting the cost of trauma insurance
- The benefit amount
- The level of coverage
- Policy exclusions
Personal details affecting the cost of trauma insurance
- Whether or not you smoke.
- Your profession.
- Your medical history.
- Family medical history - especially any genetic inheritance disorders such as heart disease or cancer.
- Whether or not you partake in any high-risk activities as a hobby (i.e. skydiving).
The cheapest trauma insurance policy isn't always the best option - cheap policies may have more exclusions and/or a lower benefit amount.
How to compare trauma insurance policies
Always shop around and compare trauma insurance policies before choosing.
Look at each policy in as much detail as possible to decide which is most suitable to your circumstances and needs.
- Premium amount
- Waiting period
- Level of coverage and exclusions
- Customer service
- Benefit amount
- Flexibility
- Inflation proofing/benefit indexation
- Partial disability benefit
- Death benefit
- Future life events
Learn more about how to compare life insurance policies before you buy.
Eligibility for trauma insurance
To secure a trauma insurance policy you will have to meet certain eligibility criteria.
This differs between insurers but usually include:
- Minimum age: 16 to 18
- Maximum age: 55 to 60
- Pre-existing conditions: if you have any pre-existing conditions that increase your risk level as a policyholder the insurer may deny your cover or choose to not cover you for the specific illness.
- Underwriting: every insurance policy is subject to underwriting - where a professional analyses the risks involved with insuring you.
If you are deemed to be high risk because of lifestyle or other factors (i.e. smoking, recent serious illness) you may be denied cover, your premiums may be set higher and/or you may be denied cover for select injuries, illnesses and/or incidents.
Trauma Insurance FAQ
What does trauma insurance cover?
Every trauma insurance policy is different but most cover up to 60 traumatic illnesses or injuries including stroke, cancer, heart disease, brain injury, dementia, Alzheimer’s and more.
Am I eligible for trauma insurance?
Most Australians over the age of 16-18 and under the age of 55-60 are eligible for life insurance but every insurer has different criteria.
Some may deny you cover, increase the cost of premiums or deny coverage for certain conditions depending on the details you disclose.
How much does trauma insurance cost?
The total cost of trauma insurance will depend on several factors including:
- Your level of cover.
- The policy benefit amount.
- Personal factors like your medical history and/or occupation.
If the insurer deems you to be high-risk they may charge you higher premiums for the same cover.
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About the Author
Shaun
McGowan
Shaun McGowan
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
