Insurance for a critical illness or serious injury
A critical illness or serious injury can make it difficult to continue to work. Trauma insurance can help support you and your family at this time and pay for medical and rehabilitation costs.
What trauma insurance covers
Trauma insurance, also called ‘critical illness’ or ‘recovery insurance’ pays a lump sum amount if you suffer a critical illness or serious injury. This includes cancer, a heart condition, major head injury or stroke. Trauma insurance does not cover mental health conditions.
What’s covered under a trauma insurance policy and medical definitions can be different between insurers. To understand what’s covered under a trauma insurance policy, read the product disclosure statement (PDS).
Trauma insurance can be used to help pay for:
- out-of-pocket medical costs
- living expenses for you and your family while you’re unable to work
- the cost of therapy, nursing care and special transport
- changes to housing if needed
- paying back your debt, for example, a mortgage
Deciding if you need trauma insurance
When deciding if you need trauma insurance and how much, think about:
- how much income you and your family would need if you couldn’t work for some time
- if you have income protection insurance or total and permanent disability (TPD) insurance, these can help replace lost income. You may hold these insurances through your super fund
- if you have private health insurance that could help pay for some medical expenses
- what support from family or friends may be available
If you need help deciding if you need trauma insurance and how much, speak to a financial adviser.
How to buy trauma insurance
You can buy trauma insurance:
- through a financial adviser or insurance broker
- directly from an insurance company.
You can choose to buy trauma insurance on its own or packaged with life cover and TPD insurance. If you buy trauma insurance packaged with life cover, your life cover could be reduced by the amount paid out on a trauma claim. To see if this applies to a policy, read the PDS or ask your insurer.
Super funds no longer offer new trauma insurance policies. But if you were in a super fund that offered trauma insurance before July 2014, you might still have it through your super fund. Check your member statement or contact your super fund to find out.
Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.
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.
Compare trauma insurance policies
Before you buy trauma insurance, compare policies to make sure you get the right one for you. Check:
- the critical illnesses and serious injuries covered
- waiting periods before you can claim
- limits on cover
- premiums – now and in the future.
A cheaper policy may have more exclusions, or it may become more expensive in the future.
Compare how long different insurers take to pay a trauma insurance claim and the percentage of claims they pay out.
What you need to tell your insurer
You need to tell your insurer anything that could affect their decision to provide you with trauma insurance. You need to give them this information when you apply, renew or change your insurance.
This can include your:
- medical history
- family history, such as a history of disease
- lifestyle, for example, if you’re a smoker
- high risk sports or hobbies, such as skydiving
If an insurer doesn’t ask for your medical history, the policy might have more exclusions or narrower medical definitions.
The information you provide will help the insurer to decide:
- if they should insure you
- how much your premiums will be
- terms and conditions for your policy
It is important that you answer the questions honestly. Providing misleading answers could lead to an insurer to decline a claim you make.
Source: smart money.gov.au