What is Trauma Insurance? The Essentials of Trauma Cover

Trauma insurance pays a lump sum amount for severe injuries or critical illnesses like cancer, heart conditions, head injuries, and more. Learn how it works.
Doctor showing how trauma insurance protects a family with his hands
What You Must Know About Trauma Insurance

    Imagine suffering from a critical illness or serious injury and the overwhelming financial burden that comes with it. Wouldn’t having financial security for you and your loved ones at such a difficult time be comforting? Thankfully, trauma insurance can help. In this article, we explore:

    1. What is trauma insurance?
    2. The benefits of trauma cover
    3. How it compares with other types of life insurance
    4. And the claims process for a successful payout

    The definition of trauma insurance, its benefits, and how it differs from other insurance types are all covered in this article.

    An injured man discussing a trauma policy with an insurance employee

    What is Trauma Insurance?

    Trauma insurance (also called critical illness insurance) is a type of insurance coverage intended to offer financial support in the form of a lump-sum payment to policyholders with serious medical conditions. Trauma insurance pays a lump-sum benefit to people suffering a serious injury or illness to help with medical expenses, lost income, and other related costs.

    Additionally, a trauma policy differs from other types of insurance, like income protection and life insurance, in that it primarily focuses on critical illnesses or injuries rather than providing income replacement or life cover.

    Can I make a critical illness claim? >

    Trauma Policy Features

    Trauma insurance covers specific major traumas and serious illnesses, like advanced cancer, a major heart attack or stroke, and other medical conditions like paralysis, dementia, prostate cancer, chronic diabetes, major organ transplants, and more.

    The medical conditions covered by critical illness insurance vary between life insurance companies. Please read the product disclosure statement (PDS) to understand the coverage.

    More about critical illness claims >

    How Do I Buy Trauma Insurance?

    To buy trauma insurance, it’s best to consult with a financial adviser or insurance broker to ensure your financial circumstances are considered. Alternatively, you can make direct contact with an insurance company. Generally, trauma insurance policies are stand-alone or linked with other insurance policies (like life insurance) and are sometimes included with an Australian super fund account.

    Getting expert financial advice helps when deciding if you should purchase trauma insurance and how much coverage you need.

    Can I Get Trauma Insurance Through My Super Fund?

    It is no longer possible to purchase trauma insurance through a superannuation fund due to alterations to Australian legislation introduced on July 1, 2014.

    About Insurance Premiums

    You can control the cost of insurance premiums by choosing a linked policy, which is generally more cost-effective. Additionally, you can reduce the price of other cover levels by lowering the payout value. Some trauma insurance policies also offer a ‘buy-back’ option, allowing you to reinstate the original life insurance amount after a certain period following a successful trauma claim.

    Additionally, choosing stepped or level premiums significantly impacts how much you will pay for trauma coverage, both now and in future years. This is how it works:

    Stepped premiums: at policy renewal, the price is adjusted annually based on a greater claim probability as you age.

    Level premiums: charges are not age-related; hence, you pay a greater initial premium with fewer changes over time.

    How Australians Use a Trauma Payout

    Typically, Australians use the lump sum payment from trauma insurance for various things, like debt payments, mortgage payments, paying for medical expenses, or taking time off work to concentrate on healing. People who make a successful trauma insurance claim have financial freedom, reducing stress during a challenging period.

    A man comparing different types of insurance policies and writing notes

    Comparing Trauma Insurance with Other Insurance Types

    Trauma insurance (also called critical illness insurance) is distinct from other insurance types like income protection, life insurance, and total and permanent disability insurance because it is specifically created to offer financial protection for severe injuries and critical illnesses. We’ll compare trauma insurance with these insurance plans to examine them more closely.

    Income Protection Insurance

    Income protection insurance provides regular payments for a temporary inability to work due to illness or injury. In contrast, trauma insurance offers a lump sum payment for specific critical illnesses or injuries, regardless of whether you can work or not.

    How to make an income protection claim >

    Life Insurance

    Life insurance pays a lump sum upon the insured’s death or diagnosis of a terminal illness, providing financial support to the beneficiaries. Choosing the best life insurance policy for your needs considers your circumstances, finances, and those of your surviving dependents. Doing this ensures the loved ones of the life insured are protected in case of death.

    On the other hand, trauma insurance covers critical illnesses or injuries, including serious illnesses, during the insured’s lifetime, providing financial relief to the insured person during their time of need. Private health insurance can complement this coverage by providing additional benefits and options for medical care.

    More about life insurance payouts >

    Total and Permanent Disability Insurance

    Total and permanent disability (TPD) insurance provides a one-time lump sum payment if you become disabled due to an illness or injury and can no longer work.

    Trauma insurance, in comparison, focuses on providing financial relief for critical illnesses or injuries, regardless of whether they lead to permanent disability.

    More about TPD versus Trauma Cover >

    A graph showing the change in insurance premiums over four years

    Factors Affecting Trauma Insurance Premiums

    Several factors can affect the cost of trauma insurance premiums, such as:
    • Age
    • Your Gender
    • Current Health
    • Occupation
    • Lifestyle choices

    For instance, older Australians and those with a pre-existing medical condition will have higher premiums due to an increased risk of a trauma-related illness or injury. Also, women typically pay higher premiums than men because they live longer and, hence, are more likely to suffer from a critical illness or injury.

    Trauma insurance policy paperwork

    How to Choose the Best Trauma Insurance Policy

    Choosing new trauma insurance policies for the first time can be confusing. However, expert guidance can simplify the process and help you find one that meets your needs and requirements. Assessing the options, including T&Cs and how you qualify for a payout, is necessary to choose the best coverage.

    Deciding between trauma insurance policies requires consideration of your personal circumstances, financial resources, and specific needs. Compare different policies to evaluate which coverage option is best for you, considering factors such as:

    Assessing Coverage Options

    Deciding between trauma insurance policies requires consideration of your circumstances, financial resources, and specific needs. Compare different policies to evaluate which coverage option is best for you, taking into account factors such as:

    • Age
    • Current health and medical history
    • Lifestyle considerations
    • Family history

    Furthermore, your financial resources, including income, savings, and debt, as well as your requirements for a lump-sum payment, ongoing income protection, and a death benefit payout, must all be considered. Consult a financial advisor or insurance broker who can help you choose the best policy for your situation.

    Reading the Product Disclosure Statement (PDS)

    When recommending a financial product, a finance or insurance provider must give you a product disclosure statement (PDS). This document outlines details on the main attributes of the product, including costs, commissions, risks, benefits, complaint-handling procedures, and the process for making a critical illness claim.

    A thorough read of the PDS is crucial to understanding the policy’s terms, conditions, exclusions, and the insurer’s definitions of covered medical ailments. By using this information, you can feel confident when selecting a trauma insurance policy, giving you peace of mind that you have adequate protection if you are diagnosed with a critical illness or severe injury.

    The Claims Process for Trauma Insurance

    In Australia, the trauma insurance claims process involves submitting required documents like doctor’s records and assessments and then waiting for a decision. Here are the steps:

    Collate and Prepare Documents

    Filing a trauma insurance claim typically requires the provision of documentation like medical records, proof of identity, and any other information requested by the insurer. Typically, these include:

    • The insured person’s details
    • Diagnosed illness or injury
    • Associated medical treatment
    • Test results and diagnostic reports
    • Any other relevant medical records

    A successful claim generally relies on providing honest, comprehensive, and accurate information when lodging your case. Any discrepancies or missing information can trigger delays or claim rejections.

    Claim Approval Timeline

    The claim approval timeline for trauma insurance can differ based on the insurer and the complexity of your case. However, insurance companies typically aim to provide a decision within a specified time frame, such as ten days. However, depending on the circumstances, the process could occasionally take longer, e.g., between 6 and 12 months.

    During the claims process, please be patient and proactive. Ensure you provide all necessary details and quickly respond to any requests from the insurance provider. Doing this will help escalate the process, giving you a faster outcome.

    Legal Advice for Trauma Insurance Payouts

    When you have an approved claim, trauma insurance pays a lump sum benefit based on your level of coverage. Unsurprisingly, life insurance companies are often more focused on profits than helping your financial situation at a challenging time. That’s when our experienced insurance litigation lawyers can assist.

    Aussie Injury Lawyers is one of Australia’s leading personal injury compensation law firms, with a 99% success rate for super insurance claims. Furthermore, all our legal services are 100% no win, no fee. It’s free to find out if you can claim your payout value and chance of winning. Call Now – 1300 873 252

    Critical Illness Insurance FAQs

    Is critical illness insurance worth having in Australia?

    A major trauma, serious injury, or illness can stop you from working and jeopardise your finances. At such a time, critical illness insurance gives you peace of mind, knowing you can still pay the bills, support yourself and your family, and medical and rehabilitation costs.

    What is the difference between income protection and trauma insurance?

    Income protection insurance pays a percentage of your income to maintain your quality of life. Conversely, a trauma payout gives you a lump sum amount.

    What is the purpose of a trauma policy?

    A trauma policy is a type of insurance that relieves financial pressure if you suffer from medical conditions that require costly treatment, long recovery periods, and/or major lifestyle changes. It allows you to cover costs that would otherwise be too much of a burden when you can’t earn an income.

    Is a trauma claim payout a lump sum payment?

    When you have a successful trauma insurance claim, you will receive a once-off lump sum payment. How much you receive depends on the insured value contained in the terms and conditions.



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