What Does Trauma Insurance Cover and Do You Need It?

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When a serious injury or illness strikes, you may not be able to continue working, yet the bills keep coming, even when your income stops. Trauma insurance can be a financial safety net during such times, providing a lump sum payment that ensures you can still put food on the table, and you don’t fall behind on your bills. In essence, trauma insurance cover gives you financial breathing room, so you can focus on getting better without worrying about providing for yourself and your family.

But is trauma insurance right for you? How much coverage do you need, and how do you choose the right policy? We’ll walk you through everything you need to know about trauma insurance, what it covers, and how to pick a policy that suits your lifestyle.

What is Trauma Insurance and What Does it Cover?

Trauma insurance is a type of insurance cover that pays out a lump sum if you get a serious injury or get diagnosed with a critical health condition.

The most commonly covered conditions are heart attack, stroke, cancer, and head injuries. Conditions affecting the brain and spinal cord, such as multiple sclerosis, dementia, and epilepsy, are also covered under most trauma insurance policies.

It’s important to read the product disclosure statement (PDS) to see the complete list of conditions a particular policy covers, including how severe they should be before you can make a claim.

For example, a policy may specify that it only covers life-threatening cancers, including the removal or treatment of malignant tumours. If you get diagnosed with a benign (non-cancerous) tumour, the trauma insurance policy may not cover you, even if you undergo surgery to remove it. Similarly, a policy may cover a regular stroke but not a mini-stroke, or what’s called a transient ischemic attack (TIA).

The list of illnesses and injuries insured varies from one policy to another, so check the fine details to know what’s covered and what’s not covered. At Lifestyle Led Wealth, we can help you understand the specifics of a particular policy, so that you make an informed decision.

Do I Need Trauma Insurance?

We don’t have to tell you this, but illnesses can be expensive, and serious ones particularly so. The estimated lifetime cost of a heart attack is $95,728, a stroke costs $37,043 to treat, and cancer-related expenses can range from $25K to more than $100K depending on the type of cancer. Trauma insurance makes it easier to shoulder these costs without impacting your family’s lifestyle.

But what if I have private health insurance, do I still need trauma insurance?

Health insurance only covers medical expenses, so even if your hospital stay is taken care of, who will take care of your bills or pay the mortgage when you’re no longer working? Even sick leave only goes so far; it’s not enough to cover your bills and living expenses if you cannot work for months.

Trauma insurance provides financial security when your income reduces or goes away completely. In addition to living expenses, it helps you pay for costs related to your medical condition, such as out-of-pocket expenses, rehab, or at-home care. Trauma insurance cover also gives you the freedom to choose not to work, so that you can focus on recovery.

Types of Trauma Insurance

There are different types of trauma insurance offered in Australia. Because the terms and features vary significantly across different options, we recommend talking to our financial advisor, Justin, who can help tailor coverage to your specific situation.

Standalone vs. Bundled Trauma Insurance

Standalone trauma insurance is available as a separate policy with a specified coverage amount.

You can also opt to have trauma insurance as part of your life insurance policy. Bundled trauma and life insurance can reduce your premiums, but it can affect the amount of life cover you have. If you have a $1 million life cover, and you make a trauma insurance claim of $300,000, this could reduce your life cover to $700,000.

Partial vs. Full Trauma Insurance

Some trauma insurance policies offer partial payouts, meaning they can pay out a percentage of the total cover for less severe conditions. Partial coverage is useful if you want financial protection for a wider range of health conditions.

Full trauma insurance pays the entire insured sum, but only for severe medical conditions.

Variable Aged-Stepped vs. Variable Insurance

Trauma insurance premiums generally go up as you age, since you’re more likely to make a claim. These are called stepped premiums.

The other option is variable premiums, which are not based on age. Premiums are higher initially but change less over time.

Choose the Best Trauma Insurance with Lifestyle Led Wealth

Plan A for all of us is to stay healthy for as long as possible. Plan B is to be ready in case life throws you curveballs. It can feel like a waste of money paying for trauma insurance without any immediate benefits, but it ensures you have the financial means to support your expenses and lifestyle should the worst happen.

At Lifestyle Led Wealth, we can help you choose the best trauma insurance cover and any other kind of personal protection insurance you may need. Justin, our financial planner, will work one-on-one with you to find a plan that’s tailored to you.

Instead of dealing with individual insurance providers — which can be a headache — Justin will walk you through a range of options that fit your budget, needs, and life plans.

Disclaimer: The information contained in this document is of a general nature only and has been prepared without taking into account your objectives, financial situation or needs.