Trauma Cover: a lump sum when serious illness strikes
Trauma Cover, also called Critical Illness cover, pays a lump sum if you're diagnosed with a serious condition covered by the policy, such as cancer, a heart attack or a stroke, whether or not you can still work.
What is Trauma Cover?
Trauma Cover pays on diagnosis or on a covered event, not on how it affects your ability to work. That means you can receive the money while you're still recovering, still employed, or still working reduced hours.
Policies list the conditions they cover, often 40 or more. Cancer, heart attack and stroke are among the most commonly claimed. Some policies also pay a smaller amount for less severe conditions.
What the money can help with
- Time off work for treatment and recovery, for you or a partner who's caring for you
- Out-of-pocket treatment, specialist appointments and travel
- Reducing the mortgage or debts so income pressure eases
- Childcare and household help during recovery
- Changes to lifestyle, home or work arrangements
Who it's usually most relevant for
- Anyone who'd struggle to cover treatment costs and time off from savings alone
- Self-employed people and single-income households
- People with a mortgage or dependants who want a cash buffer separate from income replacement
- Those who want a payment that isn't tied to proving they can't work
Why it matters at different stages of life
Serious illness can happen at any age, and the likelihood generally rises as we get older. Premiums rise too, so many people weigh cover against savings as they go.
20s
Starting out
Premiums are usually lowest while you're young and healthy. Savings are often limited, so a serious illness can leave a real gap.
Late 20s–30s
Partner & first home
A cash buffer can reduce the risk of falling behind on a new mortgage while you or a partner recover.
30s–40s
Growing family
A diagnosis can mean a partner cutting back work to care for you or the children, at the same time as extra costs arrive.
40s–50s
Peak earning years
The risk of serious illness tends to climb through these years, and so do premiums, so it's a good time to check the cover you hold is right.
55+
Nearing retirement
Premiums are at their highest and many policies end cover around 65 to 70. Some people lean more on savings at this stage, so it's worth a review.
Often a high priority Often worth considering Typically a lower priority. A general guide only. Everyone's situation is different, and the right level of cover depends on your own circumstances.
For business owners
Protecting a business as well as a family
A serious illness can take an owner away from the business for months. Trauma cover can give the business a cash buffer to hire cover, keep paying its debts, or support an owner's buy-out if they need to step back for good.
- Cash to bring in temporary help
- Key person cover for essential staff
- Supporting an owner who has to step back
Things worth knowing
The details that most often surprise people, in plain language.
Not available inside super
Trauma Cover has to be held personally and paid from your own money rather than your super balance.
Definitions decide claims
A condition must meet the policy's wording. For example, some early or low-risk cancers may not qualify. It's worth reading the definitions carefully.
Waiting and survival periods
Some policies have an initial waiting period for certain conditions, and some require you to survive a short period after diagnosis.
Premiums and tax
Premiums for Trauma Cover held personally are generally not tax-deductible. A tax professional can confirm how it applies to your situation.
How the four covers fit together
Each cover does a different job. Many people hold a combination of these covers.
| Cover | What it does | Pays when | Paid as |
|---|---|---|---|
| Life Insurance | Protects your family if you die | Death or terminal illness | Lump sum |
| TPD Cover | Protects you if you can never work again | Permanent disability that stops you working | Lump sum |
| Trauma Cover | Helps you through a serious diagnosis | Diagnosis of a covered serious illness | Lump sum |
| Income Protection | Replaces your pay while you recover | Illness or injury stops you working | Monthly benefit |
Common questions
How is Trauma different from Income Protection?
Trauma pays a lump sum for a diagnosis of a listed condition, regardless of whether you stop working. Income Protection pays a monthly benefit while you can't work. They respond to different events, so they can complement each other.
Can I claim more than once?
It depends on the policy. Some allow additional claims for different conditions, or let you reinstate cover after a claim. This varies by insurer, so check the policy's PDS.
What if I've had a health condition before?
Insurers assess your health history at application. A past condition might mean a higher premium, an exclusion, or in some cases a decline, and it varies by insurer.
Is it worth having if I have Life and TPD?
They cover different things. Life and TPD respond to death and permanent disability, while Trauma can respond to a serious illness you recover from, which is a situation the others may not cover.
Want to talk about Trauma Cover?
Tell us a little about what you're after and we'll come back with general information and options from our product providers, in plain language and with no obligation.