Trauma Insurance Guide

Trauma Insurance, also known as Critical Illness Insurance, is one of the most frequently claimed insurance policies, with 13% of all life insurance claims resulting from Trauma (2013). Everybody knows somebody who’s been diagnosed with a critical illness, for example, cancer, stroke or a heart attack.

Our guide highlights some of the key benefits of trauma insurance and how it can help protect you and your family from financial loss.

Is trauma insurance worthwhile?

Even the most comprehensive health insurance 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.
According to the Cancer Council Australia, 66% of people diagnosed with cancer in Australia are still alive five years after the cancer diagnosis. 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 and are extremely common, with 3.4 million Australians living with the condition at the cost of $3 billion a year.

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.

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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 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 amount needs to 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 up to $10,000 worth of cover for children aged 2-16 should they suffer from a number of critical illnesses including heart attack, stroke, cancer, advanced diabetes, loss of limbs or sight and more.

Trauma insurance in Australia

The first critical illness insurance was introduced in South Africa by Dr Marius Barnard. The renowned heart surgeon saw first-hand how his patients, living with heart disease and other serious illnesses, suffered financially.

I was used to operating on people and boasting about my great results of patients surviving five or six years. But all of a sudden I saw the social and financial implications. I know nothing about insurance, but I knew life insurance paid out on the diagnoses of death. But to me, my patients lived for years, but in this time they died financially.Dr Barnard
Dr Barnard’s patients told him how they had life insurance so their families would be supported when they died, but he could see the financial implications they would experience if they lived.

In March 1983, a small insurance company approached Dr Barnard with the intention of launching a new insurance policy, covering the four most common critical illnesses – cancer, heart attack, stroke and coronary artery bypass graft. In August 1983, Crusader Life took the policy to market.

Dr Barnard was invited to Australia to introduce and help promote Trauma insurance, but the initial response was negative, as most brokers preferred disability insurance. However, after a couple of years, the new policy took flight, and Trauma Insurance Australia thrived. Today, it is highly developed and a well-known life insurance product in Australia.

Do I need trauma insurance?

Yes, trauma cover is vital for everyone. Buying trauma insurance is an important first step to achieving financial security. As you get older your risk of developing a critical illness increase, so it is advisable to add 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.

With this in mind, we suggest you already add critical illness cover to your life insurance and disability, when in your 20s and consider a level premiums structure. Level premiums can save you hundreds of thousands of dollars over the duration of your policy to age 65.

Trauma insurance inside super

Several years back it was possible and permissible to have trauma insurance inside super. However, 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.

Is trauma insurance premium tax 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 payment for being diagnosed with a critical illness. However, if the policy is for a keyperson 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 insurance pay-outs taxable?

No, as the premiums are generally not tax deductible you will not pay tax on your trauma policy benefit. The lump sum benefit paid to you upon diagnoses of a critical illness, covered by your policy, is tax-free.
Make sure your trauma policy includes cover for strokes. Your risk of stroke increases with your age, poor diet, being overweight, lack of exercise, high cholesterol, and high blood pressure. Consult your advisor and be sure to read through the Trauma PDS carefully.

The quickest way to get a Trauma quote is to give us a call on 1300 135 205, or you can complete the trauma insurance quote form above, and a detailed comparison report will be sent to you for review.

Published: February 23, 2017
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Ask an Expert?


  • Robert and Debra Morton |

    I would like a quote for my husband (64yrs)and myself aged 55yrs for Trauma/Critical Illnesses Cover.

      Russell |

      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.

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