You’ve taken an important step in securing your financial future by getting trauma insurance. However, trauma insurance can be one of the least understood personal insurance products among policyholders. Even if you’ve had trauma cover for a number of years, it’s easy to ‘set and forget’, so you might now have some questions about what your trauma insurance includes and when you can claim.
Many New Zealanders aren’t claiming when they can, simply because they didn’t realise they were eligible. Falling seriously ill or injured isn’t something we like thinking about, but having the reassurance of a lump sum payout in case things go wrong can provide significant peace of mind. Let’s break down the essentials of trauma insurance, also known as critical illness insurance, to help you understand your policy better.
What is trauma insurance?
Trauma insurance provides a lump sum payment if you’re diagnosed with a specified critical condition, such as cancer, a cardiovascular condition, or another serious illness or injury. This payout is designed to help cover a range of expenses during your recovery and support you in getting back on your feet again. You can use the funds however you wish.
Your trauma cover might be standalone or included as an accelerated benefit in your life insurance policy.
Who benefits from trauma insurance?
Trauma cover provides financial security for you and your family if you become seriously ill or injured and you can’t work like before. It’s particularly beneficial if you have children or dependents that rely on your income, or have significant financial commitments. If you’re self-employed, have limited sick leave benefits or you’re a business-owner, then trauma insurance also provides a financial safety net.
Most trauma policies include free child cover. So if you have children, your trauma policy is likely to cover your kids up to the age of 21 for most of the same conditions you’re covered for, at no extra cost!
No matter your situation, if maintaining your lifestyle is important to you and your family, trauma insurance offers peace of mind by ensuring you can continue living comfortably while you recover.
What does your trauma insurance policy cover?
Your policy covers a wide variety of critical conditions. While specific conditions depend on your insurer, typical cover includes:
– Cancer
– Cardiovascular conditions
– Central nervous system conditions
– Advanced diabetes
– Dementia
– Heart surgery
– Permanent loss of hearing
– Permanent blindness
– Meningitis
– Chronic lung disease
– HIV
– Severe burns
– Severe illness or injury
– Etc.
Your policy will include a comprehensive list of defined conditions. We encourage you to take the time to review your policy documents to understand the exact conditions covered, as they can vary from insurer to insurer.
Additionally, your policy may include extra benefits like lump sum payments for counselling services related to a claim, and/or optional benefits that you chose to add-on when taking out the policy – like accidental injury cover.
Why do your trauma insurance premiums increase each year?
If your trauma premiums have been increasing year-on-year, it means you opted for age-rated payments when you took out the policy. This means your premiums are fixed for one year at a time and increase in line with your age.
If your premiums are always the same amount, it means you opted for level term payments which are fixed for the life of the policy.
When are you entitled to a claim?
In 2023, AIA (one of the insurers we work with) paid out $117.1M in trauma claims alone. 61% of those claims were cancer related, 17% were heart (cadiovascular) related, and 14% were neurological related. And most trauma claim payouts were for those aged 40-49.
If you or your child are diagnosed with a condition specified in your policy, you can make a claim, even if you’re travelling or living overseas. Some policies also offer the option to claim for different, unrelated conditions, known as “multi-cover.”
Here’s how it works:
1. Claim: Upon diagnosis of a covered condition, contact your Moneybox adviser or insurer directly to start the claim process.
2. Assessment: Your insurer will use the latest medical diagnostic techniques to confirm the diagnosis.
3. Payout: Once approved, you will receive a tax-free lump sum payment which you may spend however you wish. Depending on the condition you’ll receive payment of the full sum insured or a partial payment.
Please be aware that some conditions may have a waiting period (e.g. three months) before you can claim.
We understand that trauma insurance can be a bit confusing. If you have any questions about your trauma cover or other personal insurance policies, please don’t hesitate to get in touch for a chat. We’re here to help you understand what’s covered, when you can claim, and how to navigate the process, so you don’t miss out on a potential payout.