Trauma Insurance

When I say it pays on a specific diagnosis I really do mean specific, it’s like a high jump you either make it or you don’t. There’s a few things you need to know, when your adviser casually says that your cover will pay on the diagnosis of cancer or if you have a stroke or heart attack (the most common claims) what they really mean is that it generally pays. If your diagnosis doesn’t make the wording criteria then you could be left with nothing despite having suffered a legitimate heart attack or being diagnosed with cancer.

That is why it is so important to know the wording of the policy. When you are told by the cardiologist that you need a bypass and you think that the trauma cover will pay out to help with those unexpected expenses only to find that your old policy requires open heart surgery to be done, a procedure that is rare now. When the oncologist says that it is skin cancer and it was 1.4mm deep and you try and claim only to find that the depth for a claim is 1.5mm, you may be thankful for catching the cancer quick but the next guy in the waiting room gets a claim accepted as their policy states a depth of 1mm.

Trauma cover is bit of a stereotypical doorman. If the diagnosis isn’t on the list, then there is no claim. All that aside it should absolutely be part of your insurance protection as long as you are aware of its weaknesses. It is a rare case where a claim is declined on a technicality and generally it pays a much needed lumpsum at a crucial time. Money that can be used for anything whether that be employing a nurse, carer, extra childcare, taxis, hotels for supporters, or remodelling homes, winches and medical equipment, retraining for a different career, additional sick time or a holiday to recover.

One of the most common questions I get asked is if trauma cover is a better option than income protection. The answer is complicated and depends on the individual circumstances and budget but income protection [link] and trauma cover complement each other and one shouldn’t be seen as replacement for the other. Trauma cover won’t pay if you are off work for three months after having a knee replacement, income protection will. Trauma is for the big expenses a ‘dread disease’ will incur and income protection allows you to continue to pay the bills. Very different but both equally necessary.

Example 1:

Mary has a stroke which leaves her in a wheelchair and she and her husband live on a two level house on a hill. They use the money from the trauma claim to pay moving costs to a more suitable wheelchair friendly new home.

Example 2:

John has a heart attack and after recovering decides to give up his high stress career in Wellington and start a low stress local job at a much lower salary, using the claim to pay off much of the mortgage so that the family lifestyle isn’t impacted.