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Top 10 Questions About Trauma Insurance

Writer's picture: Price-Milne Financial Services Staff WriterPrice-Milne Financial Services Staff Writer

Trauma insurance – also known as critical illness insurance – provides a lump sum payment if you’re diagnosed with a serious illness or injury covered by your policy. It’s designed to ease the financial burden so you can focus on recovery rather than worrying about money. But how does it really work, and is it right for you? Here are the top 10 questions people ask about trauma insurance.


trauma insurance new zealand

1. What does trauma insurance cover?


Trauma insurance typically covers serious medical conditions such as cancer, heart attacks, strokes, and major surgeries. Policies vary, so it’s important to check the specific conditions covered by your insurer. Some policies also cover less common but equally debilitating illnesses like multiple sclerosis or major organ failure.


The Cancer Society of New Zealand provides more information on the impact of cancer, one of the most commonly claimed conditions under trauma insurance.


2. How is trauma insurance different from health insurance?


Health insurance covers medical costs like hospital stays, specialist consultations, and treatments. Trauma insurance, on the other hand, provides a lump sum payment that you can use however you like – whether it’s for treatment, covering lost income, or modifying your home to accommodate your condition.


3. Can I use my trauma insurance payout however I want?


Yes, there are no restrictions on how you spend your payout. Some people use it for medical expenses, mortgage payments, or even a family holiday to aid recovery. The flexibility is one of the biggest benefits of trauma insurance.


4. Is trauma insurance the same as total and permanent disability (TPD) insurance?


No, they are different. TPD insurance pays out if you become permanently disabled and can no longer work, whereas trauma insurance pays out upon diagnosis of a serious illness, regardless of whether you can still work. Some people choose to have both types of cover for broader financial protection.


The New Zealand Disability Support Network has resources on support available for those with disabilities.


5. Do I need trauma insurance if I already have income protection?


Income protection insurance provides ongoing payments if you’re unable to work due to illness or injury, but it usually covers only a portion of your income. Trauma insurance provides a lump sum, giving you immediate financial support to manage medical costs, household bills, or lifestyle adjustments. Many people choose to have both for comprehensive coverage.


6. How much trauma insurance cover do I need?


This depends on factors like your income, existing savings, mortgage, and family responsibilities. A common guideline is to have enough cover to replace at least two years of income, but a financial adviser can help determine the right amount for your situation.


7. Can I get trauma insurance if I have pre-existing medical conditions?


It depends on the insurer and the condition. Some insurers may exclude pre-existing conditions from cover, while others might offer cover with higher premiums. It’s best to discuss your options with an insurance adviser to find the right policy for your need


8. Does trauma insurance cover mental health conditions?


Most trauma insurance policies do not cover mental health conditions like depression or anxiety. However, some policies may cover certain neurological disorders or severe brain injuries that impact cognitive function.


If you need mental health support, the Mental Health Foundation of New Zealand offers resources and services.


9. What happens if I don’t make a claim?


If you don’t claim on your trauma insurance, the policy simply expires or continues until you reach the age limit set by the insurer. Unlike some life insurance policies, trauma cover doesn’t have a cash-out value if unused.


10. How do I get trauma insurance?


You can apply through an insurance provider or adviser. Policies often require medical underwriting, which means you may need to answer health questions or undergo a medical assessment. To explore your options, learn more about personal insurance here.


 

The information in this article is general information only and is not intended as financial, medical, health, nutritional, tax, or other advice. It does not take into account any individual’s personal situation or needs. You should consider obtaining professional advice from a financial adviser and/or tax specialist, or medical or health practitioner, in relation to your own circumstances and before acting on this information.

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