Trauma Insurance (also known as Critical Illness Insurance) pays a lump sum to the insured in the event of a diagnosis of certain medical conditions. The most common conditions that trigger a claim under trauma insurance are cancer, stroke, heart attack and cardiac bypass surgery, however there are numerous other conditions that are covered as well.

The purpose of Trauma Insurance is to provide the insured with a "cash cushion" in the event they suffer a traumatic medical event. There is no restriction on what the lump sum is used for. You may use the funds to pay for medical expenses or to fund some additional time off work to ensure you give yourself every chance to recover completely. Generally there will be a 90 day waiting period with Trauma policies. This means that you cannot make a claim for the first 90 days of the life of the policy. There is also the need to survive for at least 14 days after the traumatic event occurs to be paid.

Trauma insurance has become a more essential part of a persons personal protection package due to the fact that

a) people are living longer. The older people get the more likely they are to suffer a traumatic medical event and

b) advances in medical science have meant that the survivorship rate of events such as heart attack and cancer have increased dramatically. Whereas cancer was once upon a time looked upon as a certain death sentence, the rate of survival is now quite good for a lot of cancers and continues to improve all the time.

Statistically, whether we like to admit it or not, the chances of us suffering a traumatic medical event in our lifetime are fairly high. One in four women and one in three men will suffer some form of cancer before the age of 75*.

Trauma Insurance should not be confused with Income Protection Insurance. Income Protection provides you with a regular income stream to a maximum of 75% of you gross wage, in the event that you cannot work due to a period of time due to accident or illness. Trauma provides you with a lump sum upon the diagnosis of a particular medical event. If your financial adviser has a good knowledge of risk products and strategies, they can show you a way to use Trauma to cover you for 100% of your gross salary instead of the maximum 75% available through Income Protection cover alone.

By John Tutt

If you would like to speak with a financial adviser regarding Trauma cover, or any other issues around your personal protection, please click here.