Trauma cover is a relatively new product in the insurance industry. One of its more endearing qualities for many is that it provides a lump sum payment that can help those who suffer traumatic illnesses pay expenses if they are unable to work. But many ask whether it is necessary if they already have income protection cover.
Everyone’s financial situation is different and we always recommend contacting a professional financial planner or insurance provider. In the meantime, here is some information about trauma cover compared to income protection.
What is Trauma Cover?
Trauma cover is a form of insurance that provides a lump sum payment to those who sustain one of the illnesses that are on their coverage list. Usually, somewhere around 35 different illnesses are included in the coverage. The insurance is paid upon proof of being diagnosed with an illness on the list of covered conditions.
The main reason that most decide to take out trauma cover is to take care of expenses that health insurance doesn’t cover, such as rehabilitation, carers, treatments not included in health cover and loss of income.
What Conditions Does It Cover?
All policies are not the same, but most cover the most common traumatic illnesses. A partial list would include: stroke, heart attack, malignant cancer, loss of eyesight, some body organ conditions and some neurological conditions. Most trauma policies only allow one claim. In addition, trauma cover policies attached to life insurance often reduce the payout of the life insurance by the amount of the trauma cover payout.
What is Income Protection Cover
Income protection cover helps replace your income if you are not able to work due to injury or sickness. Income protection cover has variable terms, such as those paying you for a “maximum five years” or “up to age of 65.”
Agreed value insurance pays you based on your income when you first take out the insurance. It is usually the more expensive of the two kinds of income protection cover.
Indemnity value policies pay based on your income at the time of your illness or injury. It is riskier for the buyer but also less expensive. In a worst-case scenario, you are working part-time or for less money than you used to make when you become unable to work.
What is the Difference Between Trauma Cover and Income Protection?
Trauma cover insurance is paid upon diagnosis. It is not required that the person be unable to work and there is no waiting period. It provides extra money to pay expenses regardless of whether or not you are able to work.
Income protection can only be collected when you are unable to work. Moreover, the payout is computed by taking a percentage of your earnings. In other words, it is less than you are used to taking home and is tied directly to what you earn.
Call Approved Financial Planners
Call the professionals at Approved Financial Planners to learn more about trauma cover and income protection: (08) 6462 0888.