How much trauma insurance do I need?

What is trauma insurance?

Trauma insurance is a type of insurance that pays you a lump sum if you're diagnosed with a serious injury or illness. This can include things like cancer, heart attacks, and strokes. It's designed to cover costs when you can't work due to these issues. Just note that it typically won't cover mental health conditions.

Trauma insurance benefits can be used to help pay for the following:

• Out of pocket medical expenses
• Day to day living expenses
• The cost of rehabilitation, including therapy and nursing care
• Paying back debts such as your mortgage

Calculating how much trauma insurance you need

The costs of serious medical events can vary quite a bit, which can make it hard to find a sum insured that will suit every circumstance. So it's important to have a good think about your current budget and needs when deciding on how much trauma insurance cover is right for you.

Here are a few key areas to consider in your calculations:

• Debts/loans: Consider any debts you have, like a mortgage or car loan. Understand what's left to pay, so you can include this in your calculation.

• Ongoing expenses: Look at your monthly costs. This includes rent, groceries, and utilities. Essentially, it's the things you need to live comfortably.

• Dependents: If you have kids or anyone relying on you financially, calculate how much they'd need if you're no longer able to provide for them.

• Cost of care: Think about any potential medical expenses. If you need ongoing therapy, nursing care, or modifications to your home, these can add up quickly.

• Medical bills: If you don't have private health insurance, out-of-pocket medical costs can get quite hefty, especially for specialist services without medicare subsidies. Make sure you factor this into your cover needs.

• General financial security: Assess your overall financial health. Make sure there's enough of a financial cushion to fall back on.

• Other cover you already hold: Do you already have income protection or accidental injury insurance? These policies can have a level of crossover with trauma insurance and can help you cover medical expenses and lost income. Consider them when calculating your trauma insurance needs.

What to look for in a trauma insurance policy

When you're comparing trauma insurance policies keep an eye out for:

• The illnesses and injuries covered: Make sure you understand what's covered under your policy. Physical conditions like cancer and heart attacks are covered but mental health conditions are typically excluded.
• Exclusions: Check for any exclusions that may limit your cover. Some policies might not cover pre-existing conditions, specific injuries or illnesses.
• Waiting periods: Look at the waiting periods of a policy which will determine when exactly you make a claim after buying trauma insurance. A longer waiting period may leave you vulnerable if you're facing a sudden health crisis. However, a shorter one may come with a higher premium.

• Benefit amount and cost of premiums: Make sure the benefit amount will at least cover your living expenses and financial obligations if you're unable to work. If the premiums are affordable in your budget, think about a benefit amount that will also help you cover medical costs.

• 'Stepped' vs 'level' premiums: A 'stepped' premium may start lower but can increase significantly over time. Level premiums, on the other hand, will remain stable for the life of your policy but can be higher initially.

• 'Standalone' or 'linked' cover: Trauma insurance that's linked with your life insurance or other types of cover can be more affordable but there are tradeoffs. If you make a trauma claim, the payout may reduce the amount available from your life insurance policy further down the track. Always make sure you understand the implications of either choice before committing.

Every insurance provider will have slightly different inclusions and waiting periods in its trauma insurance policies. It's always helpful to read the specific policies' product disclosure statement (PDS), so you understand the details.

If you're still having trouble deciding what trauma policy to choose or are having trouble calculating your cover needs, a financial adviser or insurance broker can help you.

Expert insight

"When you're picking a trauma insurance policy, it's important to think about what makes sense for your current budget and what could financially protect your family in the event you become ill. Trauma insurance policies only come into effect in the event of major health issues like cancer or heart attacks, so considering what level of care you'd need for this and the financial implications of that is a great place to start. "

Peta Taylor

CEO of the Council of Australian Life Insurers

• Is trauma insurance worth getting?

  Trauma insurance can be a financial lifeline during tough times. Unlike income protection insurance, it pays you upon diagnosis rather than being dependent on your ability to work. This means you receive the funds upfront to cover any medical expenses, rehabilitation costs, or any necessary lifestyle adjustments.

  Whether it's ultimately worth it to you will be up to your unique circumstances. You should ask yourself:

  • • Does it fit in your budget?
    • Do you have similar cover from another type of insurance
    • How likely you are to face serious health issues.

• How do I calculate my trauma insurance needs?

  Consider your debts, ongoing living expenses, financial dependents, and any additional medical costs you might face. Trauma insurance can cover a range of conditions. However, cancer, heart attacks and strokes make up the majority of claims. Factor in the cost of these conditions in your calculation to get a rough idea of how much cover you might need.

• Do I need trauma insurance if I have private health insurance?

  Trauma insurance can still be quite valuable alongside private health insurance. Private health insurance can help with medical costs, but it may not cover everything, especially when it comes to expensive specialist treatments. Trauma insurance can take care of any of these gaps in cover and give you the extra financial support for living expenses while you recover.

Written by

Cameron Thach

Insurance Content Writer

Cameron is the local insurance scholar at Finder. With a diverse background writing in independent education, web-3, and finance, his mission is to build helpful content and that speaks to readers in language they understand. See full bio

Co-written by

Lily Jones

Writer

Lily Jones is a writer at Finder. As well as specialising in travel, Lily also writes for the shopping and legal teams and is a dab hand at reviewing software for small businesses. Lily has a Bachelor of Arts in Russian and Management Studies from University College London. Her passion for travel, food and experiencing new cultures has taken her around the globe, and you’ll always find Lily planning her next adventure. See full bio