What would you do if you were diagnosed with a serious medical condition? How would you cope financially? And if you have people who are financially dependent on you, would you be able to support them?
Trauma cover acts as a financial safety net while you recover from a serious medical condition or serious injury. It provides a lump sum payment to help you cover the costs of any treatment and lifestyle changes. It can assist with your regular living expenses and help your partner take time away from work to support you.
Here are three things you should know about how it works.
What you’re covered for
When you take out trauma cover, your Product Disclosure Statement (PDS) will include a list of medical conditions your policy covers. It’s a good idea to spend some time reviewing these definitions to make sure you have the right cover for your needs.
When you apply for insurance, you may need to complete forms and answer some questions about your health and lifestyle (smoking habits, hobbies, etc). This is to help the insurer work out:
- your individual situation and health risks, which can affect the cost of your premium
- whether they need to consider a pre-existing condition that you have. If you have a pre-existing condition that puts you at a higher risk, your insurer might need to charge a higher premium, exclude it from your policy, or be unable to offer you cover.
The Disability Discrimination Act 1992 makes it unlawful for an insurer to discriminate against anyone who is living with disabilities – including HIV except where that discrimination is based on actuarial or statistical data which is reasonable to be relied upon.1 If you have a pre-existing condition, in most cases you can still get insurance. But your pre-existing condition may be excluded – which means you can’t claim on anything related to it.
That means your policy probably won’t cover a minor or low grade medical issue, even if it falls under the same definition as a more serious medical condition. For example, there are big differences in types of skin cancer. If you’re diagnosed with an early-stage skin cancer that hasn’t spread, your treatment may be a single, short procedure. In contrast, a malignant skin cancer may require months of chemotherapy or radiotherapy.
Your PDS will specify how severe a condition needs to be for you to qualify for a claim under the policy. It will also impact the percentage of the sum insured you may be entitled to and can claim for, depending on the grading of your diagnosis.
Claiming on your cover
When making a claim, it’s important to know that many policies won’t cover you for medical conditions that are diagnosed within 90 days of applying for cover. Your cover is also unlikely to include any conditions that occur because of something you’ve done intentionally, such as deliberate negligence or self-harm.
However, one of the key benefits of trauma cover with Zurich is that you can make multiple claims over your lifetime. Most policies offer a reinstatement option that allows you to restart your cover after a claim payout, typically with a waiting period of 12 months. Your reinstated policy usually won’t cover you for the same medical condition that you have already claimed for or a related condition, but you still may be entitled to cover for other eligible illnesses.
Unfortunately, a recent study of the LGBTQ+ community found that 41% of respondents were reluctant to make an insurance claim due to fear and stigma. In other words, they’re paying for an insurance policy they’re hesitant to use.1
If you’re worried about any pre-existing conditions, it may be helpful to talk to a financial adviser before you apply for any type of life insurance. They can explain your options and support you through your application process.
To find out more about what your trauma cover includes and excludes, check the PDS or speak to your financial adviser.
Linking your insurance policies
When you take out trauma cover, it can be either a stand-alone policy or a linked policy that’s connected to your life insurance or total and permanent disablement (TPD) cover. By linking your policies, you can lower your premiums. However, linking also impacts your total sum insured.
Let’s say, for example, you have a $300,000 trauma cover policy linked to an $800,000 life cover policy. If you make a claim on your trauma cover and receive $300,000, it will reduce your life cover by the amount paid out – leaving you with $500,000 of life cover.
Depending on your situation and policy, you may be able to buy back the reduction of life cover in the future.
