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A guide to trauma insurance
Updated 25 October 2024
Steven Spicer’s expert tips for choosing the right trauma insurance for you
Steven Spicer
Executive General Manager – Health, Life & Energy
Consider a reinstatement option
In the unfortunate event you fall ill due to two different medical events covered under your trauma insurance policy consecutively, most insurers offer a reinstatement option. This allows you to buy back your policy after 12 months, so if you’re diagnosed with the second illness after this period, you may be able to claim your trauma insurance payment for both.
Pay attention to the exclusions
Make sure you’re aware of the conditions covered and the severity required for coverage by each trauma insurance policy you’re considering. It may also be worth comparing your options to see which policies cover the medical events you’re most concerned about.
Account for your medical costs
Medicare may cover the bulk of the medical costs related to some traumatic diagnoses, but there can be other unexpected financial implications. You may need to take time off work and, pay for out of pocket medical expenses, This is where trauma insurance can help.
Find out more about life insurance
What is trauma insurance?
Trauma insurance (also referred to as critical illness insurance) provides a lump sum payment if you suffer a serious medical condition. You can spend this money however you like, although you might want to use it to pay for your medical treatment, living expenses or household bills while you take time off work to recover. Whether you need trauma insurance is a personal decision. However, you might want to consider it if:
- You want peace of mind for your loved ones during a difficult time.
- You’re unsure whether your health insurance will sufficiently cover your medical costs and other associated expenses if something happened to you.
Choosing your trauma cover
How much trauma insurance do I need?
When taking out trauma insurance, you may want to take out a level of cover that makes up for any income lost while you rest and recoup. To estimate the amount you want to be insured for, consider how you’d pay for the following without your regular income:
- Mortgage repayments
- Credit card debt
- School fees
- Medical expenses
- Household bills.
Are you already covered?
You might want to look into whether you’re already eligible for any payouts from a life insurance policy should you experience an illness or injury. These could be made via an insurance company.
You can also try our free life insurance calculator to get an idea of the right level of cover for you. If you’re still not sure if a trauma insurance policy is right for you, you might want to speak to a financial adviser.
Your costs will depend on several factors. Your smoker status, family medical history, age and gender all contribute to the premium you pay for trauma cover. The amount you pay will also depend on the premium structure that you choose. The two options are:
- Variable Aged Stepped (previously known as Stepped premiums) increase year-on-year as you age. These are usually cheaper to start out with but could end up costing you more over your lifetime in the long-term.
- Variable premiums (previously known as Level premiums). These are typically more expensive to start, as the cost is averaged over a period of time. Overtime, variable premiums may be cheaper than variable aged stepped premiums. Neither premium structures are guaranteed to remain the same, and may change if the insured sum changes, by either indexation or general increase in pricing that may occur from time to time. Changes in government charges like stamp duty could also lead to an increase in your premiums. For any changes to your insured sum, your premium increase will be based on your age when the increase occurs.
How trauma insurance works
What does trauma insurance cover?
The definition of a trauma event will vary between insurers and the policy you choose. However, here are some injuries and medical conditions that you can typically make an insurance claim for:
- Cancer
- Heart attacks
- Organ failure
- Severe burns
- Major head trauma
- Loss of a limb.
To understand exactly what you’re covered for, as well as any exclusions or restrictions, refer to the relevant Product Disclosure Statement (PDS).
Is anyone eligible for cover?
Most Australians within the insurers qualifying age bracket, can purchase a trauma insurance policy, with a few exceptions and exclusions. For example, if you have a pre-existing condition at the time of taking out a trauma insurance policy, you may have trouble getting covered for related trauma, depending on the condition.
Other types of life insurance
There are some other life insurance options available, which can be taken out independently or alongside your trauma insurance. When it comes to figuring out what type of cover is right for you, remember:
- Trauma insurance is paid out as a lump sum when you fall seriously ill.
- TPD insurance covers you if you’re permanently disabled and can’t resume work. It’s also paid out as a lump sum.
- Income protection acts as a replacement for a percentage of your income. It’s generally paid out regularly (e.g. fortnightly or monthly) if you’re unable to work due to an injury or illness, for longer than your waiting period and benefits will continue to be paid until your benefit period ends or you are able to return to work, whichever is sooner.
Meet our life insurance expert, Steven Spicer
As the Executive General Manager of Health, Life and Energy, Steven Spicer is a strong believer in the benefits of private cover and knows just how valuable the peace of mind that comes with cover can be. He is passionate about demystifying the health insurance industry and advocates for the benefits of comparison when it comes to saving money on your premiums.