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Trauma insurance - what is it and why do you need it?

Louise & Ryan from the Insurance Team in Napier, NZ

Trauma insurance, also known as critical illness insurance, provides a tax-free lump sum payment in the event that you are diagnosed with one of a number of common specific illnesses, such as cancer, heart attacks and strokes. It is designed to provide financial protection for you and your family while you recover, and it can be used for a wide variety of expenses. 

Top 6 facts about trauma insurance:

1) Trauma insurance provides financial protection

None of us want to think about getting ill or injured, but sadly it’s something that happens to many families and it can be very sudden. The tax-free lump sum payment you receive from a trauma insurance policy can be used to cover any financial expenses. 

Most commonly this is used for mortgage payments, medical expenses, rehabilitation costs, childcare and to cover household bills if you and/or your partner are unable to work for a period of time.

2) Trauma insurance vs health insurance - what’s the difference and do you need both?

It’s a very common misconception that health and critical illness insurance are the same thing. Whilst there are similarities between them, there are big differences in what they cover, how they pay out and who the money is paid to. In reality, it’s advised to have both as they supplement each other to provide you with further financial protection in the event of illness or injury. 

Whilst a health insurance policy is designed to cover your medical expenses such as surgery, out-patient care and medication, these funds are paid directly to healthcare professionals from your insurance company. The lump sum payment from critical illness cover is designed for all the other expenses you and your family will incur as a result of being ill and is paid out directly to you.

3) Critical illness cover helps preserve your quality of life

Allowing yourself and loved ones to recover properly from a critical illness is crucial to prolonging your quality of life. The lump sum payment can be used for rehabilitation, home care services or modifications needed in your home such as ramps and chair lifts. It can also be used to cover your loss of income as you take the time you need to fully recover from your illness.

4) Flexibility with payouts

Unlike other insurance types, there are no restrictions on what you use your lump sum payment for. You can choose where the money goes to work best for your recovery and to relieve the financial burden of your family. This might mean it goes towards mortgage payments, childcare or home care so that your partner can continue to work knowing that you are looked after.

It could also go towards medical expenses and alternative treatments not covered by your health insurance policy. Depending on your diagnosis, you can even use it to seek medical treatment overseas, or to bring you home if you are diagnosed with the illness while abroad.

5) Who needs critical illness insurance?

If you have a family of dependents, a mortgage or other debts, limited savings or a business that relies on you; it’s crucial for your peace of mind to know that critical illness won’t cause financial hardship for you and those around you. Having a safety net during challenging times allows you to take the time and focus needed for recovery, rather than rushing to get back to fulfilling your financial obligations yourself.

6) Assistance with sick children

If the worst were to happen and your child was the one diagnosed with a critical illness or injury, trauma insurance can also provide financial cover to get you through this difficult period. This allows you to get the medical help your child needs, but also allows you to take the time off work to be at your child’s side during the sickness and recovery period.

What is covered by critical illness insurance?

The specific illnesses covered by critical illness insurance differs by insurance supplier and policy, but the most common are cancer, heart attacks and strokes. They may also cover things such as blindness, severe burns, diabetes, chronic lung and liver diseases, and many more.

It is crucial that you discuss the specific illnesses covered in each policy with your insurance adviser, as you do need a diagnosis for the specific illnesses covered to receive the payout.

How do I find the best trauma insurance policy to suit me and my family?

That’s an easy one! You ask us. Lou and Ryan are a quick phone call away from finding the right policy for you. We are always up to date with the latest and greatest policies available in the market and we’re ready to share them with you. Better still, we make it easy to understand and dare we say it - even fun - to get your family protected financially. 

So what are you waiting for? Reach out to The Insurance Team today.

This information is of a general nature only and is provided without taking full account of your objectives, financial situation or needs. Before acting on any information in this email, we recommend that you consider whether it is appropriate for your circumstances. You should not act on any advice until we have fully considered your personal circumstances and provided you with a Statement of Advice.