Why you need trauma insurance

Aussies are a tough bunch. We like to think of ourselves as being able to handle anything that comes our way. But the truth is, sometimes life throws us a curveball—which brings me to this next point about trauma insurance. 

The truth is most people don't realise how much they should be sorting it out until it's too late, which means you could end up setting yourself back a year financially because of additional costs and expenses if no one can lend you money with all those credit card bills stacking up. 

What is trauma insurance and how does it work 

Trauma insurance is designed to help you financially if you’re diagnosed with a serious illness or injury, like a heart attack, cancer or stroke, and loss of limbs (if you were in an accident). It can pay a lump sum that can be used to help with your recovery, whether that means taking time off work, paying for treatment or making changes to your lifestyle. The claim payment is usually tax-free, so it can really make a difference at a tough time.  

Common questions

Why do I need this if I have Medicare or private health? 

Medicare and private health provide some protection for medical costs incurred through treatment in a hospital or similar. They do not however, fully cover all ongoing expenses (medications) or external expenses that may be incurred. Even with private health, there are many out of pocket costs and potentially excess amounts that the benefit does not cover. 

Medicare and private health also provide no replacement for lost income while unable to work due to illness—so in some cases, a trauma pay out can protect your income while you wait for an income protection benefit to kick in, or if you want more time off work, where medically you have been cleared, and income protection doesn't provide a benefit. 

How is this different from income protection? 

Income protection relates directly to your job—if you’re unable to work due to an injury or illness for a specified period, income protection pays you a monthly benefit until you’re able to work again. 

Trauma has no relation to your work at all. There is a list of definitions or events provided by the insurer—if you are diagnosed with or suffer any of these you will be entitled to the benefit listed in your policy. 

Here’s an example: a doctor who runs a practice suffers a heart attack, thankfully, recovery is quick, and her treating doctor clears her to return to work after 2 weeks. Income protection would not pay any benefit in this instance, as she was not medically unable to do her job for longer than the income protection waiting period. Thankfully, she also had Trauma insurance, which is payable, as she suffered a heart attack. This paid out an equivalent of 6 months of income as a lump sum, allowing her to decide when she returned to work, rather than being forced back after 2 weeks to ensure cashflow continues. 

What if I have more than one traumatic event? 

Most insurers offer reinstatement—this means that 12 months after the initial event (let’s say a heart attack) you’re able to reinstate the cover, to the same benefit you had previously. You will, however, not be able to claim for the same reason as the first claim. But if you were then to suffer another covered event, you would be eligible to claim again.  

How trauma insurance can help you and your loved ones in times of need 

"I wish I can use my trauma insurance," said no one ever. But if the worst happens, it can be a lifesaver, both literally and figuratively.  

Cancer is a leading cause of illness in Australia. The estimated number of cancer cases diagnosed in 2022 is 162,163. It is responsible for 18% of the burden of ill health suffered by Australians, and almost 9% of the total spending in the health system.  

One of our clients was diagnosed in mid-March of 2021 with breast cancer only four months after she had sorted out her insurance policy. She received an equivalent of 6 months' worth of income as part of her trauma package and started her ongoing income protection claim on September 10. By February, her claim was closed, and she received the final payment. This only goes to show how important it is to have a trauma insurance policy that provides sufficient financial support when you're facing a road to recovery, not to mention a massive medical bill. 

The stats from the Australian Institute of Health and Welfare show that one in every six people living in Australia has been diagnosed with cancer, which means there are over 1 million alive or have lived through their battles first-hand. In fact, cancer continued to account for the majority of AIA Australia Death and Crisis Recovery claims in 2021. 

If you've got trauma insurance in place and you make a claim, you can use the money for anything you choose, from medical bills and rehabilitation costs to day-to-day living expenses. It can also give you the financial security to take time off work to focus on your recovery. And that’s not just good for you—it’s good for your loved ones too. Trauma insurance can take the financial pressure off your partner, kids or other family members while you’re going through a tough time. 

Trauma insurance premiums

You can generally choose to pay for trauma insurance with either: 

Stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age. 

Level premiums — charge a higher premium at the start of the policy, but changes to cost aren't based on your age so increases happen more slowly over time 

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future. 

*Source: moneysmart.gov.au 

Get covered and rest easy

We all have someone close to us battle cancer or suffered a major health event and these experiences are traumatic. And the aftermath can be even worse. Not only do you have to cope with the physical and emotional effects of the trauma, but you also have to deal with the financial fallout. If you don't have insurance, the costs of medical care and mental health counselling can quickly add up. With trauma insurance, the costs of recovery are covered. So if you've ever experienced a traumatic event, or if you're worried about the potential for future trauma, sorting out trauma insurance could be the best decision you can ever make. 

If you’re considering whether trauma insurance is right for you and your family, the answer is most likely a resounding yes. From providing a much-needed financial safety net to giving policyholders' peace of mind, it can be truly life changing. So, if you’re ready to get covered, chat with your financial adviser or book in a call with Skye in case you don’t know where to start. We’d love to help you find the right insurance for your needs.