Review Trauma Insurance Australia

What is Trauma Insurance?

Trauma insurance is a type of life insurance policy that provides you with a benefit. Generally, you’ll be able to use the paymentfor financial support if diagnosed with a critical illness, as defined by your insurer in your Product Disclosure Statement (PDS). You can use the benefit to help pay medical expenses, cover any loss of income and provide for your family while you recover.

Advantages and Disadvantages of Trauma

You can generally use the funds received from a trauma insurance policy to pay your medical bills. However, you’ll typically also be able to use it to reduce your mortgage and financially support you and your family while you recover. In certain cases, you might also need the payment for medical costs, covering you or your partner’s salary while recovering, rehabilitation costs, and other unexpected expenses. 

However, it’s important to consider the drawbacks of this type of life insurance cover. Generally, the main disadvantage of trauma insurance is that it only covers specific conditions defined in your PDS. Chronic pain, mental health conditions or sports or pastimes injuries  may mean that you’re unable to work, but they’re not commonly covered under a critical illness policy.

How Does Trauma Insurance Work

Trauma insurance is a type of life insurance that pays out a benefit if you’re diagnosed with a specified critical illness or condition. Before taking out a policy, there are several key things you need to be aware of:

• You will generally need to survive for at least 14 days from the date of diagnosis before you are eligible to receive your benefit.
• If death occurs within 14 days, you will not be eligible for a benefit but will be eligible for a life insurance benefit if you have life cover as a linked benefit.
• There is generally a 90-day waiting (qualifying) period on all policies in Australia at the start of your cover, which excludes any critical illnesses diagnosed or becoming apparent to a reasonable person during this time.
• Although trauma premiums are not tax-deductible, the sum paid is tax-free, and you have complete control over how the money gets spent.

What Critical Illness Covers

Trauma Insurance typically covers up to 60 critical conditions to provide financial support to the insured, should they suffer from a condition listed. In general, 80% of claims are for heart disease, cancer, heart attacks, and stroke. The number of illnesses you are covered for depends on your choice of insurer and policy type; Standard vs. Plus.

Trauma Insurance Policy Structures

When you purchase trauma cover, you generally have the option to choose between three differrent policy structures. Each has it’s own benefits so it may be a good idea to compare your options before making a decision.

• Stand Alone Cover: When you buy a critical illness policy, you’ll generally have the option to purchase a stand alone policy which you don’t need to link to life cover. 
• Combined (Linked) Cover: Critical illness cover can typically be combined or linked with other types of cover like TPD or Life Insurance. When you make a claim on one type of cover, the benefits on your other types of cover will be reduced by the same amount.
• Super Linked: These types of policies are typically similar to combined policies. However, this option gives you the choice to seperate ownership between superannuation and self-owned. Which means you could potentially have your life insurance in super and your super linked trauma insuance is held in your name. 

What affects my insurance premiums?

Generally, your trauma insurance cost is determined by several different factors. This includes the type of policy you choose, whether your premiums are stepped or level, and your age and gender. The following are factors that’ll typically impact the cost of your cover.

Policy Type

Depending on the insurer you’ve chosen, you’ll generally have a choice between Standard or Plus policies. Standard policies usually cover 30 to 44 core critical illnesses, while the Plus option typically includes an additional 10 to 15 less critical conditions. Typically, there is no significant price difference between the two; however, there is a big difference in the number of conditions you may be covered for.

Standard

Standard policies cover 30 – 43 major critical illnesses, including cancer, heart, neurological and permanent conditions, organ and blood disorders, intensive care and other events.

Plus

Plus Policies cover an additional 10-20 more minor conditions, including loss of hearing or sight, early-stage cancer, diabetes, Crohn’s disease, partial Alzheimer’s disease and more. For these conditions, you will typically receive a partial payment. Because Plus Policies offer cover for additional illnesses, they are generally more expensive.

• Adult insulin-dependent Diabetes Mellitus
• Burns of limited extent
• Carcinoma in-situ (CIS)
• Chronic Lymphocytic Leukaemia
• Hydrocephalus
• Malignant melanomas
• Partial blindness and deafness
• Prostate tumours
• Severe Endometriosis
• Systematic Lupus Erythematosus (SLE) with Lupus Nephritis

Your sum insured

How much cover you need typically depends on your personal requirements. This includes the amount of money you would require to help pay for medical treatments and ongoing household expenses and help reduce any debts to focus on your recovery. You will also need to consider the amount of cover you can afford. Generally, the higher your sum insured, the more expensive your premiums will be.

Your premium structure: Level premiums vs. Stepped premiums

Typically, two types of premium structures are available to you when buying critical illness insurance. Stepped premiums tend to start lower; however, they will increase each year as you age. Level premiums start higher; however, they do not increase due to a change in your age as they work off your policy entry age. In general, level premiums are more affordable in the long term.

The insurer selected and their rates/premiums for the policy

Generally, each life insurance company determines the cost of their premiums. Insurers typically add policy fees in addition to your base premium rate and any relevant stamp duties and loadings. Compare policies from several insurers to find a premium that suits your requirements.

Your Age and Gender

Generally, you will be assessed according to your age and gender when applying for trauma cover. Typically, women pay more for life cover than men, and your premiums are more expensive the older you get. Therefore, applying for cover sooner rather than later is a good idea to avoid paying a higher premium.

Smoking status

Typically, people who smoke may pay 50-100% more for their life insurance premiums compared to non-smokers. This is because smoking is associated with various health risks, such as cancer and heart disease. If you’re a smoker, it’s important to disclose this when applying for cover so that you can be correctly assessed.

Health status

Your health plays a significant role in the cost of your life insurance. If you have any pre-existing medical conditions, it’s important to disclose this when you apply for cover. This is because your insurer will use this information to assess your risk. Generally, the higher the risk, the higher the premium.

Additional policy options selected

In most cases, these additional benefits vary between insurers. However, there are usually a few unique built-in benefits that you can find on critical illness policies. Examples of unique benefits include accidental injury benefits or child cover.

• Double Trauma: Typically allows you to buy back the portion of life insurance reduced in a combined policy
• Trauma Reinstatement: Reinstates your trauma cover 12 months after a claim
• Child Cover: You may have the option to include this benefit in your policy for free or you could purchase it seperately to extend the protection of insurance to your children.
• Life Cover Buy Back: A great way to maintain your full life insurance benefit in a combined policy, even if you suffer a critical illness and a full claim is paid out.

Compare Trauma Insurance Policies

Policy	Premium estimates
Insurance Critical Illness stand-alone insurance (Plus)	$35.57
Accelerated Protection Critical Illness – Insurance Health Sense (Standard)	$45.39
Protection Critical Illness Insurance Preferred (Standard)	$46.90
Wealth Protection Trauma Cover (Standard)	$48.33
Protect Trauma Cover (Standard)	$50.66
OneCare Trauma Cover (Premier)	$51.21
Clear Choice Trauma Standard (Standard)	$54.26
Priority Protection Crisis Recovery Stand Alone Benefit (Standard)	$73.21

Source: Life Insurance Direct Comparison Engine (July 2022; Premium estimates for $300,000 worth of trauma insurance with stepped premiums for a 30-year-old non-smoking male who lives in NSW)

Will I have enough savings if I can’t work?

No one knows what the future holds, but your savings could quickly disappear if you’re diagnosed with a critical illness or injured in an accident. Trauma insurance can give you peace of mind, knowing that you will financially care for yourself and your family if something happens to you. Generally, a good rule of thumb is to apply for enough coverage to help you maintain your current financial situation should you be unable to work.

Which company has the best trauma insurance in Australia?

Typically, there is no one best insurance company in Australia. The best life insurance company is typically the one that best suits your requirements. It’s usually a good idea to speak with a financial adviser or fill in the quote form below, and a life insurance specialist will contact you to help assess your needs.