Trauma insurance pays you a lump sum on the diagnosis of a specified non-pre-existing illness or injury, generally including heart attack, stroke, cancer, and paraplegia.
Trauma insurance was created when it was realised that medical advances were resulting in patients increasingly surviving major health problems, but that the financial cost of survival was prohibitively high for patients (e.g. medical costs, medicine, time off work, rehabilitation etc).
In other words, patients didn’t lose their lives… they lost their life savings instead.
This means that most families are carrying significant financial risk should the unexpected happen. The big question you have to ask yourself is:
‘Would your family be able to maintain their lifestyle if you suffered a serious illness and, while unable to work, faced substantial medical and rehabilitation expenses?’
If your answer to this question is no, you need to consider transferring that financial risk to an insurance company.
Your financial adviser can help you do that, as well as answer any questions you have about trauma insurance, and then calculate how much trauma insurance you need to safeguard you and your family in the event something should happen to you or your spouse.
And, if you wish, your adviser will use our sophisticated computer program to ‘broker’ the major insurers to find you the right cover at a competitive price.*
What is trauma insurance typically used for?
If you become seriously ill, a trauma insurance payout can free you up from financial worry. It’s to help you get well sooner by:
- Meeting medical, pharmaceutical, specialised therapies and rehabilitation costs not covered by your health fund
- Paying for a carer
- Repaying debt
- Topping up your Income Protection policy payments
- Paying for extended time off work (so you can fully recover before you return to work)
- Topping up your income if you decide to go back to work on a part-time basis only
- Using your payment to create a cash reserve to boost your retirement savings or fund a family holiday.
‘Standalone’ or ‘linked’ policy?
You can choose a ‘standalone’ trauma policy or a trauma policy that is ‘linked’ to your life insurance policy.
A ‘linked’ policy is generally cheaper than a ‘standalone’ policy
With ‘standalone’ cover, if you make a claim, other insurance cover you have with the insurer won’t be affected.
With ‘linked’ cover, if you make a trauma claim there may be an equivalent reduction in your linked life insurance benefit.
Caution on policy definitions
You should choose a policy which defines ‘trauma’ in a way which suits you.
Some policies cover a broader range of medical conditions than other policies.
And some policies pay out in the early stages of illness while others wait until later before they pay out.
Choice of premium options
‘Stepped’ premiums increase each year in line with your age. ‘Level’ premiums generally remain constant until you’re 65, depending on which ‘Level’ premium option you have selected, at which point they convert to ‘Stepped’.
In other words, Stepped’ premiums are more affordable in the early years, while ‘Level’ premiums tend to be more affordable in the later years (before they convert to ‘Stepped’).
How do the insurance companies view you as a risk?
Some insurance companies may charge you significantly less than other companies for the same cover, simply because they see you – or your occupation – as a lower risk.
That’s why you should use a financial adviser who has the ability to ‘shop around’ the reputable insurers to get the best solution for your particular situation.
John is married to Lisa and they have three children and a mortgage. John is employed, Lisa is a stay-at-home mother.
Despite the fact that John has income protection insurance, the couple is concerned that, should John suffer a serious illness, the family could be in trouble financially.
We would recommend that John purchases enough trauma insurance to cover significant medical and associated costs should he suffer a trauma.
His cover should also allow for the repayment of their debt as well as to top up the payments he would receive from his income protection policy.
We would also recommend that Lisa takes out trauma insurance.
1Cancer Council Australia (2011) Facts and Figures http://www.cancer. org.au/Newsmedia/factsfigures.htm viewed 1 May 2012.
2Cancer Council Australia (2011) Facts and Figures http://www.cancer. org.au/aboutcancer/FactsFigures.htm viewed 22 May 2012.
3Stroke Foundation (2011) 10 Things You Should Know About Stroke http://www.strokefoundation.com.au/blog/?p=905 viewed 22 May 2012.
4National Stroke Foundation (2012) Facts, Figures and Statistics http:// www.strokefoundation.com.au/facts-figures-and-stats viewed 1 May 2012.
5Bupa Australia (2011) Key facts about stroke http://www.bupa.com.au/ health-and-wellness/health-information/az-health-information/stroke.
*If you have certain pre-existing conditions, you may not be able to obtain trauma insurance.
Call Invest4Life on (07) 5456 1355 to discuss your insurance needs with our Financial Advisers.
Disclaimer: This information has been produced by Australian Unity Personal Financial Services Ltd (‘AUPFS’) ABN 26 098 725 145, of 114 Albert Road, South Melbourne, VIC 3205, AFSL & Australian Credit Licence 234459. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, tax, or personal advice and should not be relied on as such. You should obtain financial advice relevant to your circumstances before making investment decisions. AUPFS is a registered tax (financial) adviser and any reference to tax advice contained in this document is incidental to the general financial advice it may contain. You should seek specialist advice from a tax professional to confirm the impact of this advice on your overall tax position. Nothing in this document represents an offer or solicitation in relation to securities or investments in any jurisdiction. Where a particular financial product is mentioned, you should consider the Product Disclosure Statement before making any decisions in relation to the product and we make no guarantees regarding future performance or in relation to any particular outcome. Whilst every care has been taken in the preparation of this information, it may not remain current after the date of publication and AUPFS and its related bodies corporate make no representation as to its accuracy or completeness. Published: February 2017 © Copyright 2017