Trauma Cover - What you need to know!

It is the life insurance option that many people do not know about – yet trauma cover can be essential if you experience a sudden illness or accident. Here is how it could protect you if the unexpected happens. 

What would you do if you were diagnosed with a serious medical condition and were unable to work? How would you and your family cope financially? 

Trauma cover acts as a financial safety net while you recover from a severe illness or injury. It provides a lump sum payment to help you cover the costs of any treatment and lifestyle changes, as well as taking care of your regular living expenses. 

Here are three things you should know about how it works. 

What you are covered for 

When you take out trauma cover it will include a list of medical conditions your policy covers. It is a clever idea to spend some time reviewing these definitions to make sure you have the right amount of cover for your needs. These can include cancer, coronary disease, stroke etc. 

Trauma cover is a lump sum payment designed to cover medical conditions that would have a major impact on your life. This might include an illness or injury that requires costly treatment or rehabilitation and has a long recovery period, or a condition where you will need to make significant lifestyle changes. 

This means your policy will not cover a minor medical issue, even if it is like a more serious medical condition. For example, there are big differences in types of skin cancer. If you are diagnosed with skin cancer that has not spread, your treatment might be a single procedure. In contrast, malignant skin cancer may require months of chemotherapy or radiotherapy. 

Note that trauma insurance is not medical insurance, so it does not automatically pay for your medical expenses. 

Claiming on your cover 

When making a claim, it is important to know that some medical conditions are not covered if they happen within the first 3 months of applying for trauma cover. Your cover is also unlikely to pay a benefit if the insured event is caused directly or indirectly by an intentional self-inflicted act or attempted suicide. 

However, one of the benefits of trauma cover is that you may be able to make multiple claims over your lifetime. Most policies offer a reinstatement option which allows you to restart your cover after a claim payout, typically with a waiting period of 12 months. Your reinstated policy usually will not cover you for the same medical condition as your claim or a related condition, but you will still receive cover for other eligible medical conditions. Reinstatement is an extra-cost option that must be in place before the claim occurs. 

To find out more about what your trauma cover includes and excludes, check the PDS (Product Disclosure Statement) or speak to your financial adviser. 

Linking your insurance policies 

When you take out trauma cover, it can be either a ‘stand-alone cover’ or a ‘linked cover’ that is connected to your life insurance or total and permanent disablement (TPD) cover – or both. By linking your cover, you can lower your premiums; however, linking also impacts your total sum insured. 

Let us say, for example, you have a $300,000 trauma cover linked to $800,000 life cover. If you make a claim on your trauma cover and receive $300,000, it will reduce your life cover by the amount paid out – leaving you with $500,000 of life cover. 

Depending on your situation and policy, you may be able to buy back the extra life cover in the future. Buy-backs can be extra-cost options that must be in place before the claim event happens.