Where would you get the funds if your medical bills quickly add up due to a critical illness diagnosis?
Critical Illness Insurance (aka Trauma Insurance) can safeguard your finances and help you pay your bills while you focus on your recovery.
Trauma (Critical Illness) Insurance: What Is It?
Trauma insurance is a life insurance policy. It pays a lump sum benefit if you’re diagnosed with a specified medical condition. You could use this money to compensate for lost income and pay for medical expenses while recovering.
Trauma insurance cover can be purchased as a stand-alone policy or as an add-on to life insurance cover or total and permanent disability (TPD).
How Does Trauma Insurance Differ from Other Life Insurance Products?
Life Insurance: Life cover gives a lump sum payment when you die or are diagnosed with a terminal illness.
TPD Insurance: Total and Permanent Disability insurance pays a lump sum when you’re permanently disabled and can’t return to work.
Income protection: Income Protection insurance is an ongoing monthly payment if you can’t work for a period due to a serious illness or injury.
What Is the Difference Between Trauma Cover & Health Insurance?
Even though both offer similar protection in the event of an illness, private health insurance and trauma cover payout in distinct ways. Trauma insurance provides a tax-free lump sum payout that can be used for any purpose, whereas health insurance covers actual medical bills.
Pros and Cons of Critical Illness Insurance
A trauma benefit can provide a crucial safety net and financial protection when faced with a serious medical condition. However, like any insurance product, you must consider the pros and cons of trauma insurance and promptly make an informed choice.
What are the Benefits of Having Trauma Cover?
Critical illness cover has many advantages, for example:
- You can immediately get the lump sum payment if your claim is approved.
- You can spend the claim funds as you choose without receipts as proof.
- You can use the cover amount to pay living expenses, take a holiday to recuperate, or make modifications to your home.
- You can employ a caregiver, nanny, or housekeeper to care for you or your kids.
What are the Disadvantages of Having a Trauma Cover?
Similar to other insurance policies, critical illness cover has several disadvantages as well, such as:
- Trauma insurance only covers conditions listed in the policy under the specific circumstances noted in the policy. In other words, your trauma insurance may not cover certain critical illnesses.
- If your policy is linked to your Life insurance or TPD insurance, the benefits on your linked cover will be reduced by the same amount if you make a Trauma insurance claim.
A financial adviser can help you choose a critical illness policy that fits your needs.
What Is Covered?
Trauma insurance compensates for conditions that significantly impact the quality and length of your life. Coverage is usually limited to serious injury or medical crises involving heart attack, renal failure, major organ transplants, cancer, paralysis, and a few others. Different insurers have a specific list, which varies from plan to plan.
COVID-19 is not commonly covered by trauma insurance, depending on the individual insurer and policy conditions. Some insurers have processed COVID-19-related critical illness claims, while other insurance providers are amending their trauma insurance policies to include it.
The best way to know is to talk to your insurance broker directly. If your diagnosis leads to severe complications such as heart attack or kidney failure, your policy may include these as critical illnesses.
What’s Not Covered?
Trauma insurance often only covers serious medical conditions that need long-term care. It does not cover common diseases or illnesses easily treatable or managed.
Also, your trauma insurance policy will typically not cover any pre-existing medical conditions or health issues you had before purchasing the insurance.
Most critical illness plans do not cover mental health conditions, like depression and anxiety, as they’re not considered critical illnesses even though mental illness may have the characteristics of a critical illness.
Who Needs Trauma Cover?
Even when in great shape, the healthiest people experience illnesses they can’t prevent. Benefits for critical illnesses are paid regardless of the life insured’s ability to work.
Hence, you can use the money to pay off debt or rehabilitation costs, acquire alternative or specialist medical care, or change your lifestyle.
People worried about paying a lot out of pocket for medical emergencies may want to consider buying a Trauma Policy.
How to Purchase Critical Illness Insurance?
Australian residents between 18 and 60 years of age can buy trauma insurance as a stand-alone cover or as an option under life cover. Some insurers will allow applications for those up to 64 years of age.
Super funds do not offer trauma insurance, but you can get it directly from a financial adviser, insurance provider, or insurance broker.
When Can I Claim on Critical Illness Cover?
You can claim critical illness benefits if you are diagnosed with a serious illness covered by your policy. When your doctor confirms your diagnosis, you should immediately talk to your financial adviser or insurance company about what you can do.
The waiting period for claiming trauma benefits is about eight weeks. This time is needed to process the claim correctly, but the process can go much faster if you immediately give the right information about your claim.
Find the Right Trauma Insurance to Protect Yourself with CCFPG
A critical illness policy may be worthwhile if:
- Your salary is your only income.
- Your accrued sick leave is not sufficient to cover a long period of illness.
- You’re self-employed.
- You don’t have an emergency fund for living expenses.
Consider getting expert advice about whether critical illness cover should for part of your life insurance plan.
You can speak with an experienced financial adviser at Central Coast Financial Planning Group. We have the knowledge and experience to create a cost-effective insurance plan with adequate coverage for you and your family’s needs. Start today by calling or booking online to secure your initial complimentary meeting.
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.[/vc_column_text][/vc_column][/vc_row]