Basics of Trauma Cover

Trauma cover is designed to help you recover from a serious illness by supporting your treatment and lifestyle changes. When considering trauma cover, it is essential to grasp three essential factors to understand the level of coverage and its implications when filing a claim:

  • Trauma Definitions - types of conditions that are covered

  • Stand-alone or Linked - the structure of your cover

  • Trauma Reinstatement - claiming multiple times

Trauma Definitions

Every trauma cover policy includes a set of definitions that determine the following:

  • The medical conditions covered by your policy.

  • The level of severity required for a claim to be paid.

  • The percentage of the insured sum that will be paid if you experience one of the covered conditions.

Generally, trauma cover is designed to provide protection for serious illnesses that typically involve expensive medical treatment, a significant recovery period, or major lifestyle adjustments. It is not intended to cover minor conditions that only require simple or non-invasive treatments.

For instance, you might receive a diagnosis of skin cancer that has not spread and is treatable with a single procedure. Alternatively, you might be diagnosed with an aggressive form of skin cancer that necessitates months of chemotherapy or radiotherapy. Although both cases fall under the category of "skin cancer," they have vastly different impacts on your life.

To access the specified trauma definitions applicable to your policy, you can refer to the Product Disclosure Statement (PDS) related to your insurance. Many of these definitions have become standardised across the life insurance industry. It is important to carefully review and understand the variations between policies to ensure you choose the most suitable cover for yourself and your loved ones.

Stand-alone or Linked

You have the option to purchase trauma cover either as a standalone policy or as part of a "linked policy" that is connected to a Life or TPD cover.

Typically, linking policies can result in lower premiums, but there are considerations to keep in mind when making a claim. Let's say you have a $200,000 trauma cover policy that is linked to a $500,000 life cover policy. If you successfully claim on your trauma cover and

receive a payout of $200,000, your life cover benefit will be reduced by that amount, leaving you with $300,000 in coverage.

Depending on your situation, your insurer might offer the opportunity to repurchase the additional life cover at a later time. However, it's important to note that in the meantime, your life cover will be significantly reduced.

Trauma Reinstatement

One of the lesser-known advantages of trauma cover is the possibility of making multiple claims throughout your lifetime. This is because certain trauma cover policies offer a reinstatement option after a successful claim. With this option, you can resume your policy after a specified period, usually 12 months or more, following the payment of a claim. It's important to note that a reinstated policy will typically not provide coverage for the same medical condition you previously claimed on or any related conditions. However, it can still offer protection for a wide range of other serious illnesses.

To gain a better understanding of trauma cover and its exclusions, it is recommended to consult the relevant Product Disclosure Statement or seek guidance from your adviser.

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