While life insurance is very important to have, in some cases it can become obsolete. Statistics show that many people suffering a debilitating illness don’t pass away suddenly, but instead are left with an illness or injury that can last for years. Life insurance in this case is of no benefit, as payment is generally only upon death.
This is exactly where trauma insurance fills the gap. This type of insurance pays a lump sum in the event that you suffer from one of the specified traumas, such as cancer, heart attack, coronary bypass surgery and stroke. There are usually between 20 and 30 specified ‘trauma events’ in a trauma insurance policy.
As a general rule, trauma cover cannot be taken out within superannuation and the premiums are not tax deductible. However any lump sum payment is received tax free. Premiums again vary according to personal circumstances, similar to life insurance.
So why get trauma insurance? As we mentioned life insurance is not paid until death. How would you cope if a stroke left you paralysed for a substantial period of your life? What if you could not continue to work and had debts to keep paying. It’s not something we like to think about (as is the case for life insurance generally) but that’s exactly the type of situation that trauma insurance provides for.
How much is appropriate and is this type of insurance for you? That’s something that can be discussed with one of our qualified advisers.