This Won't Hurt A Bit
Sydney Morning Herald
Wednesday May 12, 2004
The strategy To work out whether I need trauma insurance.
Why would I need more insurance? Trauma insurance gives you a lump sum if you're diagnosed with a serious illness or injury. It fits between life insurance - when you have to die for a claim to be made - and income protection insurance, which is only available to working people and provides an income if they're unable to work due to sickness or injury. Helen Troup, the head of risk insurance product management at ING, says trauma insurance should be considered by people who don't have ready cash they could use if they suffered a traumatic health condition. The good news is there's no requirement on how you spend the money if you claim. The general idea is that you'll use it for medical expenses and rehabilitation, but if you reckon you'd get better quicker by taking a first-class trip around the world, that's OK, too.
What sort of medical conditions are we talking about? Troup says most claims are made for cancer, heart attack, heart surgery and stroke. But different policies will cover different conditions. Usually the more "deluxe" (expensive) the policy, the more conditions it will list. It's important to understand what is covered when you're buying trauma insurance. But as a guide, you'll be covered for serious conditions - not sun spots or mild heart conditions.
Do I need it if I'm healthy? It's always the unknown that bites you. Cancer and heart attacks do strike relatively young and healthy people and trauma can also cover you for conditions sustained through accidents.
What happens if I die? Trauma cover can be bought as a stand-alone policy where you don't get paid if you die from the condition within a predetermined period. But most people buy a policy where death is listed as one of the conditions when you can claim. Because trauma insurance is much more expensive than life insurance, many people choose to buy separate life insurance as well.
What are the main differences between policies? Apart from the conditions covered, and price, Troup says the two main areas of difference are buybacks and exclusions.
If you buy trauma cover that includes payment for death, the death component is automatically cancelled if you make a claim on your policy. However, many policies allow you to buy back the claim as standard life insurance cover.
Let's say you have $100,000 of trauma/death cover. You have a heart attack and claim the $100,000. Normally that heart attack would make you ineligible to buy life insurance (or make the costs too prohibitive). But after a fixed waiting period, such as 12 months, some companies will allow you to buy $100,000 of life insurance on the same terms that you bought the trauma cover.
In relation to exclusions, Troup says insurance companies want to make sure they're not paying out to people who bought the cover suspecting a major illness - such as a woman who was aware she had a lump in her breast. So in addition to the standard 13-month exclusion for suicide and self-inflicted conditions, companies will have waiting periods before claims can be made for some other conditions.
ING, says Troup, has six conditions that are excluded for 90 days. Other policies can have more or fewer conditions and different waiting periods.
© 2004 Sydney Morning Herald
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