Trauma Insurance

Before taking out trauma insurance, you’ll need to sit down and consider how much cover you’ll need. While most insurers will let you choose a benefit amount, exactly how much you need will depend on your individual situation.

To help you decide, it can be worth considering a range of different factors, like:

• how many dependents you have
• how much you owe towards your mortgage and other debts
• how much you have in savings and other investments
• whether you’ll have other financial support
• whether you have other insurance, like total and permanent disability (TPD) cover or income protection.

Trauma insurance premiums differ from person to person. The cost of trauma insurance typically depends on several key factors, including:

• age
• gender
• medical history
• lifestyle
• coverage amount
• insurance provider.

There are a few key scenarios when you typically won’t be covered by your trauma insurance. Firstly, most insurers won’t cover an illness or an injury if it’s the result of an intentional, self-inflicted act. Secondly, most insurers will only pay benefits for an injury or illness that’s considered somewhat ‘severe.’ For example, broken bones won’t usually be covered, but loss of limbs would likely be considered an insurable event.

In the eyes of insurers, if you have a pre-existing medical condition, you’re often more likely to make a claim. With this in mind, insurers will often apply loadings or exclusions to account for the extra risk. A loading is a percentage increase that’s applied on top of the standard premium. On the other hand, an exclusion means that you’re unable to claim for an illness or injury that’s the result of an excluded pre-existing condition.

When it comes to taking out a trauma policy, you’ll often need to provide your insurer with personal details like:

• age
• job
• medical history
• family history
• lifestyle and smoking status
• high-risk sports, hobbies, or occupations.

In some instances, your insurer might also ask you to complete a medical assessment or request medical reports prepared by a doctor. If they don’t ask for this information, it could mean there are more exclusions listed in your policy or narrower policy definitions.

It can be easy to confuse trauma insurance with TPD cover and vice versa, but they are two different life insurance products. Trauma insurance provides financial support to help you recover from an illness or injury that isn’t permanently disabling. TPD insurance pays a lump sum in the event you become totally and permanently disabled because of an illness or injury and can’t return to work. For instance, trauma insurance can cover you while you take time off to recover from a heart attack or cancer, while TPD will cover you if you permanently can’t work due to your cancer diagnosis or heart attack.

In late 2024, life insurers introduced new labels for life insurance premiums. Instead of level and stepped premiums, life insurance premiums are now known as variable premiums and variable age-stepped premiums. Variable age-stepped premiums increase as you age, whereas variable premiums tend to be more stable over time.

With variable age-stepped premiums, cost of cover increases each year as premiums are based on your age at your policy anniversary. This is mainly because the likelihood of you making a claim increases as you age.

Variable premiums will usually be more expensive to begin with, but may work out cheaper in the long run. This is because the insurer calculates your premium based on your age when you take out the policy but then averages out this cost over a number of years.