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Trauma Insurance

Russell Cain

Fact Checked

Updated: 19 May 2024

What is Trauma Insurance?

Trauma insurance, otherwise known as critical illness cover, protects you if you are diagnosed with a medical condition that will have a significant impact on your life, such as cancer, coronary artery bypass surgery or stroke. Your insurer will typically pay a lump sum benefit which can be used to pay medical expenses and support you and your family while you recover.

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The lump sum benefit of critical illness insurance can help:

How does critical illness insurance work?

Critical illness insurance in Australia generally pays a tax-free lump sum when you are diagnosed with one of the specified illnesses listed in your chosen insurer’s PDS. In exchange for coverage, you’ll pay a premium. The benefit amount paid depends on your level of cover and can be up to $5 million for the diagnosis of a traumatic event. However, the amount of coverage you choose must be financially justifiable.

You are eligible to purchase trauma cover between the ages of 16 and 64, depending on your insurer, and it covers you 24 hours a day, seven days a week anywhere in the world.

Each insurer differs, but most policies can cover you for a variety of illnesses.

What critical conditions are covered under trauma insurance?

Many standard trauma insurance policies in Australia are similar, however, what differs are their definitions of conditions and diseases, and the types of extra benefits you can choose to add for an additional fee.

A Plus policy covers more than the usual number of conditions and is also more expensive than a Standard policy.

Standard trauma policies cover 30 to 44 core critical illnesses including:

  • Alzheimer’s disease
  • Angioplasty
  • Aplastic Anaemia
  • Benign Tumour of the Brain or Spinal Cord
  • Blindness
  • Cancer
  • Cardiac arrest
  • Cardiomyopathy
  • Chronic Kidney Failure
  • Chronic Liver Disease
  • Coma
  • Coronary Artery Bypass Surgery
  • Deafness
  • Dementia
  • Diplegia
  • Encephalitis
  • Heart Attack
  • Heart Valve Surgery
  • Hemiplegia
  • Loss of Independence
  • Loss of Limbs or Sight
  • Loss of Speech
  • Major Head Trauma
  • Major Organ Transplant
  • Medical condition requiring life support
  • Medically Acquired HIV
  • Motor Neurone Disease
  • Multiple Sclerosis
  • Muscular Dystrophy
  • Occupationally Acquired HIV
  • Paraplegia
  • Parkinson’s Disease
  • Pneumonectomy
  • Primary Pulmonary Hypertension
  • Quadriplegia
  • Severe Burns
  • Stroke
  • Surgery of the aorta
  • Triple Vessel Coronary Artery Angioplasty

Plus trauma policies cover an additional 10 to 15 lesser critical conditions, including:

  • Adult insulin dependent Diabetes Mellitus
  • Burns of limited extent
  • Carcinoma in-situ (CIS)
  • Chronic Lymphocytic Leukaemia
  • Hydrocephalus
  • Malignant melanomas
  • Partial blindness and deafness
  • Prostate tumours
  • Severe Endometriosis
  • Systematic Lupus Erythematosus (SLE) with Lupus Nephritis

Do I need trauma cover?

If your family cannot financially survive if either you or your partner is diagnosed with a critical illness, then you most likely need some form of trauma cover. Many Australians struggle when someone in their family is diagnosed with a life-threatening or debilitating health condition. By taking out trauma insurance, you can help ease that financial burden.

 

Also, if your family has a history of certain conditions or diseases, trauma cover could help pay for living expenses and medical bills in a time of great financial need.

Your family may struggle to come to terms with the housekeeping and child caring duties, not to mention medical costs, household bills, credit card debt, and mortgage repayments.  The lump sum benefit provided from a trauma claim could help.

 

How much cover do I need?

Most people determine their trauma insurance need by the amount of money you would require helping you pay for medical and household expenses, as well as reduce your debts and sustain your current lifestyle. You must consider your current and future financial responsibilities, number of dependents and cost of living.

How much does critical illness insurance cost?

Trauma premiums are generally more expensive than Life Cover or TPD insurance when you take out a standalone policy. Bundling critical illness cover with your life insurance policy will generally work out cheaper. While your overall cost will depend on several factors, an insurer will usually base your standard premium rates on:

What is the average cost of trauma insurance in Australia?

Gender
$200,000
$500,000.00
$750,000.00
$1,000,000.00
Male
$36.06
$80.45
$116.66
$149.97
Female
$43.10
$95.20
$136.41
$173.74

The above average cost of critical illness insurance was calculated using lifeinsurancedirect.com.au’s free online comparison tool. Calculations are based on retail (advised) trauma policies for a non-smoking 35-year-old individual living in NSW, as at March 2018.

How to get a trauma insurance quote with Comparing Expert

When comparing trauma insurances quotes, it’s important to remember that there are many trauma policies available on the Australian market. However, the variety of medical conditions and illnesses covered by insurers vary, so make sure you carefully analyse the definition of each disease as outlined in your product disclosure statement (PDS) before choosing a trauma cover policy.

How can I claim trauma insurance?

A trauma claim can generally be made after 14 days of surviving a traumatic event; however, this time frame varies from company to company. After the conditions for release are met, you are paid either a lump sum or partial payment depending on the terms and conditions outlined in your product disclosure statement (PDS), and which traumatic event you have suffered.

Take note; when calling your life insurance company to lodge a claim, your call will be recorded, and the information you provide might have an impact on your claim being approved. ComparingExpert offers full claims services to all our clients.

Latest disease and illness statistics for Australia

When considering critical illness insurance Australia wide, cancer has been one of the leading causes of death. According to the Australian Institute of Health and Welfare (2017), it was estimated that an average of 131 deaths a day was contributed to cancer. It is expected that more than half (54%) of cancer cases diagnosed in 2017 were males and 71% for those were aged 60 and over.

In 2016 there were over 19,000 deaths in Australia caused by Ischaemic heart disease (Australian Bureau of Statistics).

Australians living with Dementia are estimated at 425,416 in 2018 → 45% males and 55% females.

The estimated incidence of cancer in 2017 for Australians

Life insurance companies offering critical illness cover in Australia

Insurer and Policy Name
Policy
Number of Traumatic Conditions Covered
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Accelerated Protection – Critical Illness Standard
38
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OneCare – Trauma Comprehensive
46
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Insurance with On Track – CI Plus
41*
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Life Solutions – Trauma
44
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Priority Protection Vitality – Crisis Recovery
49
Demo Image
Wealth Protection – Extended Trauma
54*

* if sum insured is greater than $100,000

Information gathered from lifeinsurancedirect.com.au (March 2018)

How to compare Trauma insurance policies

Get trauma insurance quotes online in under 60 seconds. Use our comparison service for a side-by-side review of pricing, benefits and features from some of the largest life insurance companies in Australia.

Frequently Asked Questions and Answers

Trauma insurance in Australia is a sensible purchase if you want protection against a severe medical condition or disease which can lead to a loss of income and place a significant financial burden on your loved ones.

With the incidence of cancer increasing year on year and the occurrence of cardiovascular diseases preventing many families from living a full life, it is becoming increasingly important to consider trauma cover as part of your life insurance portfolio.

If you already suffer from a medical condition or disease, your insurer may decide to place a loading on your premiums, resulting in higher costs. If you choose to purchase any additional benefits, your premiums will also increase. However, this option may be well worth it considering that additional conditions and diseases are covered.

If you are in doubt over which trauma policy to purchase, we can help you compare the top policies available in Australia and offer you free trauma insurance quotes.

No, trauma insurance premiums are not generally tax deductible according to the Australian Taxation Office (ATO) because critical illness insurance is not supposed to replace your income. The primary purpose of your trauma cover is to help you pay for expensive medical treatments and support you during your recovery.

No, the proceeds from your trauma claim are not taxable, meaning the lump-sum benefit paid from your dread disease cover is generally tax-free. However, if you had trauma cover in place through your super fund before 1 July 2014, the benefit payment may be taxed when paid out to non-dependent beneficiaries, for example, adult children or your business partner.

All trauma policies are different and whether it is worth it to you depends on your unique circumstances, general health and family history. However, if you think you might need support paying the costs not covered by your health insurance, such as rehabilitation services, lost income, and specific medications then critical illness cover might be a good choice.

Before purchasing critical illness insurance, you first need to distinguish between disability insurance and dread disease insurance. Dread disease cover generally pays a tax-free lump sum if you are diagnosed with a critical illness, while TPD cover pays you a lump sum if you become totally and permanently disabled due to an illness or accident.

No. Since 1 July 2014 super fund rules have changed, and trauma cover is no longer available for purchase through your superannuation.

If you already have dread disease insurance in your self-managed super fund (SMSF) before the legislative changes of 2014, then you can potentially still rely on your existing trauma cover if you’ve held your cover continuously.

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Specialist

Russell is the founder and CEO of Life Insurance Direct and has been quoted in The Sydney Morning Herald, The Age, Independent Financial Adviser, Risk Adviser, Adviservoice, and Insurancenews. Russell has over 15 years’ experience in the Australian life insurance & financial services sector and is instrumental in driving the latest innovations in our insuretech platform.

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