What is Trauma Insurance?
Trauma Insurance – Also known as Critical Illness Cover, pays a lump sum in the event of suffering one of a range of specified illnesses, the most common 3 claims are for cancer, heart attack and stroke.
Although trauma insurance is sold by life insurance companies, it actually has nothing in common with life insurance. For a start, you don’t have to die to benefit from the trauma insurance policy. Trauma is designed to pay out a lump sum in the event of you suffering from a serious illness or if you have to undergo certain types of surgery.
The lump sum paid out is designed to help with the extra costs of living with a particular condition but it’s important to note that it only pays out if you contract one of a defined list of illnesses. In other words, if your illness isn’t on the list, you won’t get a cent.
A majority of all trauma claims are for cancer, coronary artery bypass surgery, heart attack, kidney failure, organ transplants and stroke and these core illnesses are usually on the list. If you want other illnesses to be added, you’ll usually pay more and this should be a serious consideration when looking into comparing new versus existing cover.
Unless you have substantial savings (or other sources of income), some form of trauma cover makes good sense.
What’s the benefit of Trauma Insurance Cover?
Trauma Insurance normally pays a lump sum if you are diagnosed with one of a number of specified ‘trauma illnesses’ during the life of the policy. You could use the cash payment from a policy either to pay off a debt (such as a home loan) or to provide you with an income if you become too unwell to continue working.
What different types are there?
The vast majority of Trauma Insurance policies cover the following illnesses:
- Heart attack
- Coronary artery bypass surgery
- Kidney failure
- Major organ transplant
- Multiple sclerosis.
What should I think about when choosing a policy?
Firstly you should decide the sum of money you would need if you were diagnosed with an illness which prevented you from working again. You might need to pay off a specific debt like a mortgage, arrange for nursing care or pay for further medical assistance. Your dependents are likely to need an income which will allow them to continue to live in the same way as they had prior to you giving up work.
Combined Life and Trauma policies
Combining trauma and life insurance reduces the overall cost of a policy versus two separate policies and is an excellent way of ensuring a loan or mortgage debt is protected.
Setting up trauma insurance without payment in the event of death is like having a car with airbags but no seatbelt.
Many policy holders don’t realise that in order to claim you have to survive for a number of days after diagnosis, typically 14 days. Adding life insurance to form a policy paying the event of death or earlier trauma has relatively little impact on the premium whilst ensuring that you cover yourself fully should you pass away within the 14 days.