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How Changes to Trauma Insurance Affect Your SMSF

What is trauma insurance and how does a recent change in regulations affect your Self Managed Super Fund (SMSF)?

Trauma insurance is a form of cover that pays a lump sum if the insured receives a diagnosis of any of the critical injuries or illnesses specifically mentioned in the policy. Conditions most commonly covered are coronary bypass, heart attack, stroke or cancer. The lump sum is paid out whether or not the insured is unable to work; the diagnosis is the only factor.

How Changes to Trauma Insurance Affect Your SMSF

Ever since the Superannuation Industry Supervision Act (SISA) in 1993, trustees of SMSFs have been allowed to purchase trauma cover for any member of the fund as long as a long list of requirements were met. However, this situation changed on 1 July 2014. Members who join an SMSF after 1 July 2014 are no longer eligible to have the SMSF purchase trauma insurance for them.

The SMSF can only insure a member for the following conditions

  • Terminal Medical Condition
  • Death
  • Temporary Incapacity (In which the member is temporarily unable to work)
  • Permanent Incapacity (In which the member is permanently unable to work)

What to Do

For those who were a member of a fund before 1 July 2014, your SMSF can continue to provide you with trauma cover. In other words, you will be “grandfathered in” as long as you stay in the same SMSF. If you joined or will be joining an SMSF on or after 1 July 2014, the fund will not be able to provide you with trauma cover.

Call the Perth professionals at Approved Financial Planners to learn more about the effects of the new regulation. The information here is general in nature and we can’t guarantee that it is relevant to your unique and personal situation.

We will be glad to provide an obligation-free consultation. We can gather your relevant information and help formulate a plan specifically for your needs.

Call us today: 08 6462 0888.

The Difference Between Trauma Cover and Total Disability Insurance (TPD)

Many Australians carry both trauma cover and total disability insurance (TPD). Here’s why.

Although trauma cover and total disability insurance (TPD) are similar, they are designed to produce two different outcomes. That makes it important to understand what both coverages do and what they don’t do.

Difference Betweek Trauma and TPD Insurance

Trauma Insurance: the Basics

Trauma insurance is taken out for specific illnesses. It pays out a lump sum if you are diagnosed with that illness. The lump sum is designed to help you take care of your financial responsibilities while you recover: both your standing expenses and new expenses such as rehabilitation or carers. Ideally, you are able to fully recover and get back to living your life with no severe financial consequences.

Trauma insurance covers such illnesses as cancer, heart attack and coronary bypass surgery. The illnesses are very specific and are defined within your insurance policy so that you know exactly what occurrences will result in benefits and what ones won’t.

Total and Permanent Disability Insurance: the Basics

Total and permanent disability insurance is taken out for if you become permanently disabled. The payment can be on a monthly basis or in a lump sum. It is designed to help you maintain an income similar to your current one to support yourself and your family. It can also be used to help pay off some of the medical bills you may incur as a result of your disability.

Basically, TPD insurance replaces your income if you are no longer able to work. Policies can be written to cover you if you can no longer work in your field or can require that you are unable to work any job. Obviously, the job-specific coverage will cost more.

The Main Difference Between Trauma Insurance and Total and Permanent Disability Insurance

The main difference between trauma insurance and total and permanent disability insurance is that trauma insurance will pay you for the specified illnesses while you are trying to get back to work, while TPD insurance doesn’t pay you unless you can never go back to work.

Consequently, trauma insurance costs more and is more likely to result in a claim.

Call the Professionals

Call the Perth professionals at Approved Financial Planners for a free consult: 08 6462 0888.

Trauma Cover: Back to Basics

In response to the many questions we routinely field about trauma cover, we would like to provide some of the basic facts.

Trauma Cover: Back to Basics

What is It?

Trauma cover provides you with a lump sum payment if you sustain an injury or illness that is specifically covered in your policy. After suffering a traumatic illness or injury, the money can help you take care of the immediate adjustments you may have to make to your lifestyle as a result of trauma.

Why Would You Need It?

Nobody plans on having a traumatic event such as a severe injury or illness, but the sad reality is that a severe injury or illness can happen to anyone at anytime. If you decide that it’s appropriate to make plans to protect yourself from the financial consequences of such an event, trauma cover can provide you with the assurance that if something does happen, you will have resources to help with your financial well-being while you recover.

Doesn’t My Private Health Insurance Cover Trauma?

Your health insurance usually covers medical treatments, hospital stays and any extras you pay. However, when traumatic events occur, there are often expenses that aren’t covered by your health insurance. For example, you may need rehabilitation equipment or certain kinds of specialised therapies that aren’t included in your health insurance.

The lump sum payment from your trauma cover can also help you pay your expenses if you are unable to work for a prolonged period of time.

I’m Healthy. Am I Really that Likely to Suffer a Traumatic Event?

For most of us, the statistics say that we will suffer a traumatic event sometime in our lives. According to a report called Australia’s Health 2012 produced by the Australian Institute of Health and Welfare, one out of three Australian women and one out of two Australian men will receive a diagnosis of cancer before the age of 85.

The same agency also put out a media release on 21 June 2012, stating that the leading causes of death for Australians were, in order, ischemic heart disease, cerebrovascular disease, dementia and Alzheimer’s disease.

Talk to Approved Financial Planners

To learn more about trauma cover and if it may be appropriate for you, call the professionals at Approved Financial Planners: (08) 6462 0888.

What is Trauma Insurance and Why Do You Need It?

Everyone knows about life insurance. Many people know about total and permanent disability cover. Some even know all about income protection cover. But one kind of insurance that often slips between the cracks is trauma insurance. In the insurance industry, trauma insurance is a relative newcomer, having been in existence for around thirty years.

What is Trauma Insurance

But make no mistake; trauma insurance is a great policy to have and may be the one on which most Australians are the most likely to collect. So, what is trauma insurance and why do so few Australians know about it?

Trauma Insurance: How It Works

Trauma insurance provides you with a lump sum payment in the event that you suffer a traumatic illness. Each insurer has a different list of what conditions they deem payable, so you should choose your provider carefully.

By the Numbers

We mentioned that trauma insurance is the insurance that Australians are the most likely to collect. So, what conditions generate the most claims? According to the AMP website, in 2011 their trauma insurance claims were paid in this ratio:

30% of claims were for cancer not including prostate, bowel or breast cancer. Breast cancer generated 27%, prostate cancer 11% and bowel cancer 6% of claims. This puts cancer at a total of 74% of all trauma insurance claims. Heart attacks accounted for 10%, heart disease for 8% and strokes for 2% of claims. Parkinson’s disease was responsible for 1% of claims and other conditions for 5%.

Why You May Need Trauma Insurance

Income Replacement

As expected, a traumatic illness usually causes one to miss work. The lump sum payment that the policy provides can be very helpful and it will allow you to concentrate on your recovery and spending time with your family. Remember that your living expenses don’t stop when you become ill. Trauma insurance can be valuable in helping you keep your household expenses current while you recover.

Debt Repayment

Often, the effects of traumatic illness are permanent. That makes it difficult for many to return to work in their former capacities. For some, return to work is part time or in a less strenuous position, resulting in less money. The payment can help you pay down or pay off your mortgage or other long-term debt.

It’s Worth a Phone Call

To learn more, call (08) 6462 0888.