What is trauma cover? And do I need it?

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What is trauma cover?

Trauma cover can help you to pay for your usual expenses if you can't work because of a major illness. It's also known as critical illness or major illness or crisis recovery protection .

It's a type of life protection that:

  • Pays you a lump sum amount if you're diagnosed with a specified major illness such as cancer , heart attack , stroke ( or some other conditions), and
  • Is designed to provide you with funds when you could need this the most
  • Is relatively expensive because it
    • is more likely that somone will make a claim than with other types of life cover,
    • can cover a wide range of illnesses.


Incidence - am I really likely to get that sick?

Due to amazing advances in medicine, more people than ever are surviving traumatic illnesses such as cancer, heart attack and stroke.

So although there is a high likelihood (80%) of cancer, stroke or heart disease during your lifetime, nevertheless you also have a 70% likelihood of surviving such an event .


Trauma cover was introduced in Australia in 1994 and was developed by Dr. Marius Barnard- a surgeon who worked with brother Dr Christian Barnard (who performed the first successful open heart transplant surgery). He recognized that people who survived a critical illness such as heart attack or stroke often didn't have any or enough  financial support if they lived, and so came up with the idea of:

"a living benefit to those who survived a major illness to offset lost income and pay additional expenses.  Critical Illness cover gives you financial independence when you need it most. You need insurance  not only because you are going to die but because you are going to live."


Depending on your circumstances...

You should consider the need for trauma cover if you have:

  • a mortgage or any other debt
  • family or family responsibilities
  • insufficient cash resrves to cover unexpeced medical or hospital bills
  • a business or partnership or if you are self-employed

Most people "sign up" to some form of life protection when their super account is set up, however trauma cover isn't available through super (since 2014) for new members.


How much is enough?

  • Most people choose an amount that will reduce their debts, medical and household expenses.
  • If you were suffering from an illness like cancer which involved chemotherapy and time to recover, you may be off work for 2 years.
  • Trauma cover would be able to provide a lump sum payment, and there are no restrictions on how you can use the funds.


Do your sums first!

It's really worth reviewing what types of cover you need (or already have in place) that can provide you with a financial safety-net in the case of an unexpected event - for example life cover, total and permanent disability cover and income protection. So check out:

  • what you're covered for (exisiting and current policies), and
  • the amount of benefits that can be paid out to you.


Costs of cover

  • The premium for trauma cover is not tax -deductible.
  • However, non-super benefits paid from trauma cover are generally tax-free.
  • Trauma premium costs are directly related to your age and current state of health.


Next steps

Whether and how much trauma cover you need is an individual decision. If you think that you would experience financial difficulties in the event of a traumatic illness or injury, we urge you to get in touch with us so that we can assist you to establish a suitable policy.


Contact us

You are most welcome to contact us anytime if you (or some one you know) have any queries or if you want a hand sorting out what works best for you.