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Trauma cover two ways - and which one is right for you

By Robyn Bartlett
Product Manager, Asteron Life

18 July 2018

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Trauma insurance is a useful insurance product, but not one that many people think of when they think of life insurance.

It pays out a lump sum if you suffer one of the specified serious illnesses or major surgical procedures. You can choose your own sum insured and how to spend the benefit if you claim on it.

But Trauma cover is less well understood than other types of life insurance, and many customers don’t realise (unless they talk to an adviser) that there are two different ways to structure it which affect both the cost and your claims.

  • Stand Alone Trauma

    Stand Alone Trauma cover is a type of life insurance product. You can apply for any amount of cover between $10,000 and $2 million.

    If you suffer a condition that is covered and make a valid claim, your cover will be paid out as a lump sum without affecting any of your other insurance.

    If you have Stand Alone Trauma cover, you may still want to have other types of life insurance products, but you don’t have to.

  • Accelerated Trauma

    Accelerated Trauma is the same product, but it’s structured as part of your overall life insurance policy.

    If you make a claim on your cover, the amount of your Trauma claim will reduce the amount of life insurance you have. This structure reduces the premium for your trauma cover compared with the stand alone structure.

    So if you had $500,000 worth of life insurance cover and claimed $100,000 of accelerated Trauma, your life insurance amount will now be $400,000.

Restoring your cover if you make a claim

Normally it’s only possible to claim once on your Trauma insurance, and after that it’s gone.

But you can choose to add a reinstatement option to your Trauma cover. That means that you can re-purchase Trauma cover 12 months after you make a claim, in case you need it again for a different illness or injury.

If your cover is accelerated, you may also be able to buy back the amount of life insurance cover that was reduced, 12 months after your claim.  

Buy back and reinstatement are both optional extras on your policy, so it’s a good idea to talk to your adviser about what you need and how much it will cost.

Is Accelerated or Stand Alone Trauma right for you? 

Stand alone Trauma cover will give you more certainty over your life insurance, as well as an extra pay out if you suffer from one of the specified conditions.

But if you’re on a budget, accelerated cover can be a more affordable way to add a trauma benefit to your policy. If you do choose an accelerated option and you make a claim, you’ll need to remember that your available life insurance cover has reduced and take that into account in your financial plans. 

It can be hard to decide, and it will depend on the amount of cover you want and your budget. It’s a great idea to talk to your financial adviser about the different options if you’re looking at life insurance or trauma cover.

If you don’t have an adviser, we can help you find one.

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