Trauma Insurance Guide
Trauma insurance, which is also known as Critical illness insurance, typically pays out a tax-free lump sum when you are diagnosed with one of the specified illnesses listed in your selected insurer’s PDS. The amount you’ll receive typically depends on your level of coverage. Use this trauma insurance guide to make the best decision for you and your family.
Published November 2, 2023
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What Is Trauma Insurance?
If you were diagnosed with a serious medical condition which could significantly impact your life, would you have the financial means to pay your bills and care for your family while you recover? Trauma insurance generally pays out a lump sum if you’re diagnosed with a specified illness like coronary artery bypass, a stroke or you need to go for a surgery. The benefits can be used to supplement your income if you’re unable to work or cover your medical bills.
Is Trauma Insurance Worthwhile?
Even the most comprehensive health insurance policy may not cover all the costs associated with trauma. You shouldn’t have to worry about your out of pocket medical costs or household bills when trying to cope with recovery. Trauma Insurance provides peace of mind by offering financial protection, should you suffer from a critical illness specified in your policy.
Although treatment for most critical illnesses is now readily available, the costs are exorbitant. If you have dependents and/or a family history (a potential predisposition to a critical illness), it’s a good idea to get trauma insurance.
- According to the Cancer Council Australia (2019), cancer is the leading cause of death in Australia. However, 7 in 10 Australians will survive for at least 5 years after a cancer diagnosis, with the survival rate of some cancers being as high as 90%.
- Unfortunately, surviving cancer also comes with a price. Cancer costs more than $4.5 billion in direct health system costs. Every stage of cancer comes with a price tag: the cost of treatment, travel, doctor visits and hospital stays, it all adds up.
- Cardiovascular disease (CVD) and stroke are also common trauma claims, with 4.2 million Australians reportedly having a disease of the circulatory stsystem (The Australian Department of Health, 2016).
Benefits of Trauma Insurance
The main benefit of trauma cover is that it pays out a lump sum benefit, which can be used however you want.
If you are diagnosed with a critical illness and meet the insurer’s definition of that critical illness, a lump sum benefit will generally be paid to you. You gain complete control over your money and can even invest it.
Generally, the highest lump sum benefit offered by insurers is $5 million. However, the cover amount you choose must be both affordable and financially justifiable.
The lump sum benefit is designed to assist you and your family while you recover from your illness:
- Help pay for any ongoing expenses and obligations, like your mortgage and living expenses.
- Provide an income for your spouse if they are required to take time off to care for you.
- Help pay for your medical expenses, including treatment and rehabilitation.
- Providing an income for your family when you are forced to leave work.
Select insurers offer free child cover when you take out a trauma insurance policy.
The cover generally provides a benefit up to $10,000,for children aged 2-16, should they suffer from a critical illnesses listed in your PDS. For example, cancer, diabetes, loss of limbs or sight and more.
Do I need trauma insurance?
Whether or not you need trauma cover depends on your unique requirements. However, for most people, buying trauma insurance is an important step to achieving financial security. As you get older your risk of developing a critical illness increase, so you might want to consider adding critical illness cover in your 20s.
- During your 20s you are statistically more likely to get into an accident than develop a critical illness, meaning you have a lower risk profile.
- When you are deemed a lower risk, insurance companies will generally be prepared to provide critical illness cover at very affordable rates.
- You might to consider a level premiums structure. Level premiums can save you hundreds of thousands of dollars over the duration of your policy to age 65.
Which conditions are covered under trauma insurance?
Typically, Standard trauma insurance policies in Australia cover similar conditions, but what differs are their definitions of diseases and the choice of extra benefits, which you’re generally able to add to your policy by paying an additional fee. A Plus policy generally covers a broader variety of conditions, however, they are often more expensive compared to Standard policies. The trauma insurance guide in your insurer’s PDS should help you learn which conditions you’ll be covered for.
Conditions Typically Covered Under Trauma Cover
Its important to refer to your insurer’s Product Disclosure Statement(PDS) to learn about the specific conditions covered by this type of cover. However, here are a few of the conditions which are typically covered by a critical illness cover:
Conditions typically covered under trauma cover include:
- Alzheimer’s disease
- Angioplasty
- Aplastic Anaemia
- Benign Tumour of the Brain or Spinal Cord
- Blindness
- Cancer
- Cardiac arrest
- Cardiomyopathy
- Chronic Kidney Failure
- Chronic Liver Disease
- Coma
- Coronary Artery Bypass Surgery
- Deafness
- Dementia
- Diplegia
- Encephalitis
- Heart Attack
- Heart Valve Surgery
- Hemiplegia
- Loss of Independence
- Loss of Limbs or Sight
- Loss of Speech
- Major Head Trauma
- Major Organ Transplant
- Medical condition requiring life support
- Medically Acquired HIV
- Motor Neurone Disease
- Multiple Sclerosis
- Muscular Dystrophy
- Occupationally Acquired HIV
- Paraplegia
- Parkinson’s Disease
- Pneumonectomy
- Primary Pulmonary Hypertension
- Quadriplegia
- Severe Burns
- Stroke
- Surgery of the aorta
- Triple Vessel Coronary Artery Angioplasty
Additional conditions typically covered by a Plus policy include:
- 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
Trauma insurance inside super
Since 1 July 2014, trauma cover in superannuation is no longer available. If you have a trauma insurance policy purchased before July 2014 held in a Superfund, strict conditions for release will need to be followed.
These new rules were implemented because if a critical illness did not prevent a person from working, the lump sum benefit could be retained within their SMSF until a condition of release was met, such as reaching retirement age.
As trauma patients generally require the benefit immediately upon diagnosis of a critical illness to help pay for medical bills and other debts, trauma cover is no longer allowed to be funded or held in a superannuation environment. However, you may want to refer to the trauma insurance guide in your PDS to learn more.
TPD vs Trauma Insurance
Understanding the difference between TPD (Total and Permanent Disability) and Trauma Insurance is crucial for choosing the right coverage. TPD Insurance provides a lump sum if you’re permanently unable to work, while Trauma Insurance covers specific medical conditions and events. For a detailed comparison, dive into our comprehensive guide on TPD vs Trauma Insurance. It’s essential to weigh the benefits to secure your financial future effectively.
Frequently asked questions and answers
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How much does critical illness cover cost?
Generally, the premiums for standalone trauma policies cost more than premiums for TPD or Life insurance. The amount you’ll pay is generally impacted by several factors such as your gender, age and whether you smoke. To find out more about the cost, you can request a trauma insurance quote online by filling in the quote form below or calling us on 1300 135 205 and speaking with a specialist. -
Is trauma insurance premium deductible?
No, Trauma insurance premiums are not tax-deductible because the policy is not designed to replace your income, instead it pays a lump sum benefit when diagnosed with a critical illness. However, if the policy is for a key person and the policy purpose is to protect the revenue of the business, thus owned and funded by the business, the premiums would be tax deductible to the business. -
Are trauma payouts taxable?
No, generally you will not pay tax on your trauma insurance payout. The lump sum benefit paid to you upon diagnosis of a critical illness, covered by your policy, is tax-free. -
How to get trauma insurance cover?
The quickest way to get a critical illness quote is to give us a call on 1300 135 205. Alternatively, you can complete the trauma insurance quote form above, and compare policy prices and features online, side-by-side.
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I would like a quote for my husband (64yrs)and myself aged 55yrs for Trauma/Critical Illnesses Cover.
Hi Rob and Debra
We have two ways for you to access quotes, firstly I would encourage you to complete a trauma quote request at the top of this page & one of our consultants can produce a comparison report for you to compare the premiums and features of the different critical illness policies available & discuss any discounts that may be available.
If this doesn’t suit, you may want to visit our Trauma Insurance Quote Index which can give you a quick comparison of premiums only for both Trauma & Life combined with trauma cover!
If you would like to discuss you options further please contact our office on 1300 135 205.