The concept of trauma insurance, also referred to as crisis cover or critical illness insurance, is not well-known. Many individuals/people are completely unaware of it.
How does trauma insurance differ from private health insurance, when does it pay out, and what does it cover?
It may be challenging to keep working if you have a serious illness or injury. Trauma insurance can help you and your family during this difficult time by covering the costs of your care and rehabilitation. To learn more about this trauma insurance, kindly read through this article.
What is Trauma Insurance?
Trauma insurance is a type of life insurance policy that offers a benefit to you. In general, if you are diagnosed with a critical illness as defined by your insurer in your Product Disclosure Statement, you will be able to use the payment for financial support (PDS). You can use the benefit to cover medical expenses, compensate for lost income, and provide for your family while you recover.
What are the Advantages and Disadvantages of Trauma
In most cases, the funds from a trauma insurance policy can be used to pay your medical bills. However, you should be able to use it to pay off your mortgage and financially support yourself and your family while you recover.
In some cases, you may also require payment for medical expenses, such as covering your or your partner’s salary while recovering, rehabilitation costs, and other unanticipated expenses.
However, it is important to take into account the disadvantages of this type of life insurance coverage. The main disadvantage of trauma insurance is that it only covers specific conditions as defined in your policy document.
Chronic pain, mental health conditions, or sports or pastimes injuries may prevent you from working, but a critical illness policy does not typically cover them.
Pros of trauma Insurance
• Trauma insurance typically pays a lump sum payment and typically covers up to 60 critical illnesses. However, the conditions that are covered vary depending on your policy type and the insurance company.
• You may be able to combine or link this type of coverage with other policies such as life insurance or TPD insurance.
• When purchasing trauma insurance, you usually have several policy options to choose from.
• The benefits of this type of coverage can be used to cover the costs of your recovery.
• The payment from this type of life insurance is usually tax-free.
Cons of trauma Insurance
• In order to receive your claim, you must typically meet the critical illness definitions outlined in your policy documents.
• All critical illness policies, in general, have a 90-day waiting (qualifying) period.
• In order to receive your benefit, you must typically survive for at least 14 days from the date of diagnosis.
• Cover can be costly if purchased separately, and it is typically not available through superannuation.
What does it cover?
Trauma insurance is intended to provide financial assistance while you recover. This is in addition to any health-care claims, sick leave, or income-protection insurance you may have. It can help you cover expenses you might not be able to afford otherwise, such as:
• Paying off debts like a mortgage and living expenses while you are unable to work
• Medical treatment, pharmaceuticals, specialist therapies, and rehabilitation costs not covered by your health fund or Medicare
• Debt repayment, such as a mortgage and living expenses while you are unable to work
• Modifications to your home or vehicle if the effects are likely to be more permanent, but still fall short of a TPD.
• compensating for time away from work (so you can fully recover before you return to work). Having access to a lump sum can also help pay for the expenses of traveling interstate or internationally to receive the best medical care. These are general descriptions because what is covered by a trauma insurance policy varies by insurer.
How Does the Trauma Insurance Work
Trauma insurance is a type of life insurance which pays out if you are diagnosed with a specific critical illness or condition. There are several important things to consider before purchasing a policy:
• You must generally survive for at least 14 days from the date of diagnosis before you are eligible for benefits.
• If you die within 14 days, you will not be eligible for a benefit; however, if you have life insurance as a linked benefit, you will be eligible for a life insurance benefit.
• All policies have a 90-day waiting (qualifying) period at the start of your cover, which excludes any critical illnesses diagnosed or apparent to a reasonable person during this time.
• While trauma premiums are not tax deductible, the amount paid is tax-free, and you have complete control over how the money is spent.
What are the Trauma Insurance Policy Structures
When purchasing trauma insurance, you typically have three different policy structures. Each has its own set of advantages, so it’s a good idea to weigh your options before making a choice.
• Stand Alone Cover: When purchasing a critical illness policy, you will typically have the option of purchasing a standalone policy that is not linked to life insurance.
• Combined (Linked) Coverage: Critical illness insurance is frequently combined or linked with other types of insurance, such as TPD or life insurance. When you make a claim under one type of insurance, the benefits under the other types of insurance are reduced by the same amount.
• Super Linked: These are policies that are similar to combined policies. However, this option allows you to divide ownership between superannuation and self-owned. That is, you could have your life insurance in super and your super linked trauma insurance in your name.
Overall, trauma insurance is expensive but may offer some people peace of mind that they will have the money to pay privately for medical expenses and treatments if a serious medical event strikes.
If the cover is high enough to pay off a person’s outstanding debts, this may take the financial pressure away so they can concentrate on recovering from illness.