Trauma insurance is there to give you financial support you if you ever suffer from a major illness or injury, like a stroke or a heart attack. Should you experience a ‘trauma event' you can claim receive a lump sum payment which you can use for any purpose, such as to cover your living expenses while you recuperate or to pay off your debts.
How is trauma different from TPD insurance?
Trauma cover is different from TPD insurance, because you should receive your payment even if you are still able to work. You can buy a trauma policy even if you are not in the workforce.
You will only be able to claim on your trauma insurance if you suffer one of the specific conditions or injuries listed in your policy. There are crucial variations in what is covered by different trauma policies, and between their definitions of each condition.
Depending on your age, gender, health and lifestyle you will be at higher risk from certain illnesses or injuries so it's important to choose a policy that will give you the cover you want for the for the things which are most likely to happen to you.
What are some of the factors I should consider, other than price?
The cheapest policy won't necessarily provide you with the best cover, especially if you have unusual risk factors. Your job and hobbies may expose you to particular hazards, which may not be covered under many policies.
Some trauma policies offer extras which may be important for you, such as child trauma cover or a double insurance option. If you want to hold some of your life insurance within an SMSF then you could consider a linked policy arrangement, where you are able to take advantage of tax-efficiencies on your other policies but still have easy access to any benefits under your trauma cover.
Trauma Insurance Case Study
An extremely valuable safety net
Melinda bought her insurance in 2010, when she was a self-employed car saleswoman with no debts or dependents. She took out income protection and trauma cover to provide herself with a safety net in case of an accident or illness.
By February 2011 she was expecting a baby and seriously considered cancelling her income protection policy to save money, but she decided to wait until after the birth, in case of complications. Shortly afterwards she was diagnosed with breast cancer.
Her treatment involved 6 months of intensive chemotherapy and radiation therapy. The family had to relocate to Melbourne for her treatment, and her partner had to take unpaid leave to look after her and their newborn daughter.
Melinda received $225,000 in benefits under her IP and trauma policies. Because her condition was so critical the waiting period was waived and 6 months' worth of IP benefits, totalling almost $19,000, were paid up-front. Melinda recovered from her cancer, and even after paying all their relocation, medical and living expenses while they were unable to work, Melinda had enough money left over to finance full-time study, so she could train for a more rewarding career.
How to buy Trauma Insurance
The best way to get life insurance is always via a specialist advisor. Not only can they find you the cheapest policies, but more importantly they're able to identify the insurance cover which best meets your needs.
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