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Trauma Insurance
What is Trauma [Critical illness] insurance?
Trauma or Critical Illness insurance provides a cash lump sum on the diagnosis of a medical condition. The number of conditions covered (benefits) varies widely, cheaper policies often offering fewer benefits. The most common claims under these policies are for: cancer, heart attack, coronary bypass and stroke, although other conditions can be covered.
| List of common Trauma's that can be covered | ||
|---|---|---|
| Alzheimer's Disease | Aplastic Anaemia | Blindness |
| Burns - Server/Major | Cancer | Cardiomyopathy |
| Coma | Coronary Artery Angio | Coronary Bypass Surgery |
| Deafness | Dementia | Diplegia |
| Encephalitis | Heart Attack | Heart Valve Surgery |
| Hemiplegia | HIV - Occupational Acquired | Kidney Failure - Chronic |
| Liver Disease - Chronic | Loss of Independence Existence | Loss of Limbs or Eye |
| Loss of Speech | Lung Disease - Chronic | Major Head Trauma |
| Major Organ Transplant | Motor Neurone Disease | Multiple Sclerosis |
| Paraplegia | Parkinsons's Disease | Pulmonary Hypertension |
| Quadriplegia | Stroke | Terminal Illness |
| Life Cover - Death Benefit | Total & Permanent Disability | Aortic Surgery |
| Out of Hospital Cardiac Arrest | Benign Brain Tumor | HIV - Accidental Infection |
| Peripheral Neuorpathy | ||
You don't have to die...
The benefit is paid when diagnosis is confirmed - not when you die of the condition. It provides you and your family with a lump cash sum to use when it is needed most for medical care or to pay the mortgage and other debts to relieve financial pressure
Why do I need Trauma (Critical Illness) insurance?
The choice of cover depends entirely on an individual's circumstances.
Trauma Insurance was first introduced into Australia in 1986. If you have heavy debts and are at pre-retirement
age this cover may be important. A Critical illness can be just as damaging to family finances as a death and more
so if medical bills result from a long lasting illness.
While recovery is certainly possible from the illnesses covered by trauma insurance, in most cases to qualify for a
benefit the condition needs to be severe. Also if you suffer from a condition which is not specified you will not
be covered. Income protection on the other hand covers any sickness or accident related injury causing temporary
inability to work eg. stress, RSI or back injury. There is certainly room for both types of coverage however trauma
will usually be the only option for persons who are not currently working.
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Other topics
- Death benefit can be included
- Consider the Buy back option
- Illnesses which account for most claims
- Examples of why claims are declined
- Waiting Periods apply
- Real life case study
Death benefit can be included
Some trauma policies also include a Death benefit, which will have the same pay out value as the trauma benefit. In this case, obviously, only ONE pay out will be made - either on a trauma or on death. There may be savings available in buying life cover as part of a trauma package rather than as a stand alone policy. Some trauma policies also cover Total and Permanent Disability (TPD). When packaging benefits in this way you should be aware that a claim on trauma or TPD will reduce the underlying life cover unless a buy back option is purchased
Consider the Buy back option
Normally only ONE trauma benefit is ever payable to an individual under a policy - after a pay out you may become uninsurable and no longer able to buy Death, Total and Permanent Disability, Trauma or Income Protection cover from any insurer. So it is important to either purchase a buy back option or have sufficient cover to enable you to live out your remaining life on the proceeds of the claim. Buy back options are offered on some policies for an extra cost. If you purchase the option, you may, after a qualifying period of the benefit payment, re-purchase the death cover component
Illnesses which account for most claims
When looking for a trauma policy, you will be confronted with a variety of conditions covered by the policy. However four of these conditions account for the great majority of claims. Recent claims experience from one insurance company showed the cause of claims to be about 62% for cancer, 13% for heart attacks, 11% for coronary artery disease and bypass surgery, 9% for strokes and the remaining 5% spread amongst the other conditions. Therefore the definitions of these top four conditions within the policy should be carefully scrutinized. While increasing the number of conditions covered increases the likelihood of an illness being covered by the policy, the additional conditions will usually come at the cost of an increased premium.
Examples of why claims are declined
Read carefully the exclusions and other conditions for the traumas covered. Pre-existing conditions must be declared. Conditions caused by intentional self inflicted injury are usually excluded.
Claims are declined most frequently due to the following:- claim outside cover defined by policy
- pre-existing condition had not been disclosed
- claim made before expiry of the waiting period
- claim made for a condition which was not covered
- suicide within 13 months of policy commencement
Waiting Periods apply
In most cases "accidental" types of traumas are covered immediately, although many insurers impose a waiting period (commonly 90 days after the policy is accepted) for certain illnesses eg cancer, stroke, heart attack. This is particularly important when changing or replacing policies as you may not be covered during the waiting period on the new policy for certain conditions.