Trauma or Crisis Cover

The merits of crisis or trauma cover and whether you need it.

If you're diagnosed with a critical illness, crisis or trauma insurance can relieve your financial difficulties. Unlike income protection insurance, which is dependent on your inability to work, trauma cover is paid out on the diagnosis of a defined critical illness regardless of your working status.

Instead of receiving a monthly income stream, you are paid a lump sum that you can spend on whatever you like – medical bills, your mortgage, an overseas trip, even a new car. The insurance company makes no demands on how you spend the money. Trauma insurance is often an adjunct to term life policies.

Be careful to read the fine print on what your policy defines as a medical condition, such as a heart attack, for example. Policies include specific criteria on major illnesses.

What illnesses are included?
Generally the list includes heart attack, heart disease, stroke, malignant cancer, chronic kidney failure and organ transplant. In most cases trauma insurance does not cover you for an accident. The key benefit of trauma insurance is that it gives you a financial buffer so you have time to recover from an illness. If you've had heart surgery and need six months to get back to work again, it's good to know that you can afford to take that time off and not rush back into the workforce just so you can pay your mortgage. After all if you're trying to recover from a major illness, the fewer financial worries you have, the easier it will be.

A good alternative
While trauma insurance is not to be confused with income protection, it is a good alternative for those people not in the workforce. In particular it suits homemakers who have no income. Unlike income protection, the premium for women is lower than for men as statistically they suffer less from such critical illnesses as heart attacks.