Investor Education > Life Insurance > Trauma Insurance

WHAT IS TRAUMA INSURANCE?

Stroke is the leading cause of long term disability in adults and is the cause of 25% of all chronic disability in Australia.
Heart, Stroke and Vascular Diseases – Australian Facts 2001. Australian Institute of Health and Welfare, National Heart Foundation of Australia and National Stroke Foundation of Australia, 2001

Trauma insurance – also referred to as critical illness insurance – provides a lump sum benefit if the insured is diagnosed with a number of trauma medical conditions. The actual conditions covered will be specific to a policy and described in the product disclosure statement, but in general may include conditions like cancer, stroke, heart attack, heart disease, organ transplant and other serious illnesses.
 
Why buy trauma insurance?

Trauma conditions tend to be major illnesses that are often life altering. Trauma insurance is designed to assist with the hospital and other medical expenses that related to the illness, as well as to provide capital for ongoing everyday expenses and home loan repayments. Unlike income protection insurance, trauma is based on diagnosis of a defined critical medical illness and is not related to whether or not the insured is able to work. The insurance may thus enable the insured to take additional time off work to focus on getting well again.

How much cover is required?

As with other types of life insurance, determining a suitable sum to insure will depend on the specific situation and needs of the insured and their family. In additional to providing capital to pay off debts (like home loans and personal loans) and fund living expenses if the insured is no longer able to work or needs to take time off work, expenses related to the illness including medical expenses and necessary changes to lifestyle should also be considered.

If unsure about the right amount of cover, advice from a professional is recommended. It is also recommended that the lump sum insured be reviewed regularly, especially with changing circumstances that may effect whether the trauma / critical illness insurance sum insured continues to be sufficient.

Features and options

The actual trauma conditions that are covered by different policies will vary, so it is worth reviewing the product disclosure statement and comparing cover from more than one life insurance provider. Trauma or critical illness insurance can generally be arranged as a standalone insurance policy, or as an extension to a term life policy.

Taxation of trauma insurance

The lump sum benefit paid by trauma insurance on the diagnosis of a defined critical illness is tax free, and can be used for any purpose.