Why you need trauma insurance

Most individuals understand the importance of having income protection and life insurances in place but often overlook the importance of trauma insurance.

In fact, in our experience, many people are not even aware trauma insurance exists. To some degree this is not surprising as trauma insurance is relatively new, having only been available for around 30 years.

On the other hand however, the likelihood of claiming on a trauma policy is very high, much higher than other policies such as life insurance.

With this in mind then, the general lack of awareness around trauma insurance is extremely worrying.

So what is trauma insurance?

Trauma insurance provides a lump sum payment if you suffer a traumatic illness. Each policy will list the traumatic conditions covered and this will vary between insurers.

The top 4 illnesses claimed under trauma policies are:

1) Cancer

2) Heart attack

3) Stroke

4) Coronary artery bypass

These 4 illnesses make up around 90% of all trauma claims in Australia.

If you hold trauma insurance, you have up to a 1 in 3 chance of having to claim on it. With the exception of income protection insurance (which has a similar likelihood of claim), it is therefore possible trauma insurance has the highest likelihood of claim of any insurance policy you hold. Because of this, it is very important you consider trauma insurance as part of your insurance plan.

Why do you need trauma insurance?

There are a number of reasons why you should consider trauma insurance.

Replacement of income

If you suffer a traumatic illness there is a strong possibility you will need some time off work. A lump sum payment from a trauma policy can assist you to replace your income during this period so you can concentrate on treatment, rehabilitation and spending time with loved ones. Furthermore, remember your household bills and living expenses will continue while you are undergoing treatment, so proceeds from a trauma policy can assist you to meet these costs as well.

Repayment of debt

Traumatic illnesses can result in partial or total disability. In these cases, the likelihood of returning to work in the same capacity as before is minimal. In fact, it is more likely you won’t be able to work again at all. There is a chance you may be able to return to work on a part-time basis, but you would probably be in a different job role than before. Whatever the outcome, it is highly unlikely you would be able to generate the same (if any) income as before. You therefore need to consider how you would repay your debts and most importantly, your mortgage. A lump sum payment from a trauma policy can help you repay all your debts.

Medical expenses

Treatment for most traumatic illnesses is expensive. Even if you have private health insurance, the cost of your treatment may exceed the benefit provided by your policy. Proceeds from a trauma policy can be used to cover the gap, or indeed cover the entire cost if you don’t have private health insurance. Additionally, it is not uncommon for a traumatic illness to occur under circumstances that are out of the ordinary. In this case, the usual course of action is to seek out an expert on your condition to give yourself the highest chance of successful treatment and recovery. The cost of doing this will, of course, be higher than for standard treatment and as such, having a trauma policy in place could allow you to afford treatment that may not have been available to you otherwise.

A number of factors must be considered when looking at trauma insurance. These range from the sum you need to insure for, which insurer and policy to choose, how the policy is owned and understanding any optional benefits and whether paying additional for them is justified. An expert will be able to assist you in these regards.


This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax advice prior to acting on this information.Opinions constitute our judgement at the time of issue and are subject to change. Financial Planning Expert Pty Ltd does not give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.
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    Financial Planning Expert is an independent financial planning business based in Melbourne. We provide genuinely independent and conflict free financial advice. We’re experts in self-managed superannuation fund (SMSFs) advice and strategy, retirement planning, property and share investment advice, life and income protection insurance, tax planning, asset protection, estate planning and advice for Australian expatriates.