When people think about insurance, they usually think of Life Insurance or Health Insurance.
But there’s another type of cover that many New Zealanders know very little about — Trauma Insurance, also known as Critical Illness Cover.
And if you ever suffer a serious illness, it could be one of the most valuable types of insurance you have.
What Is Trauma Insurance?
Trauma Insurance pays you a lump sum of money if you’re diagnosed with a serious medical condition that meets the definition in your policy.
The important difference is that, unlike Health Insurance, the money isn’t there simply to pay a hospital or specialist.
It’s paid to you.
You can then decide how that money is best used for you and your family.
That flexibility can be incredibly valuable at a time when your health, income and normal day-to-day life may all have been disrupted.
What Can You Use the Money For?
There are generally no restrictions on how you use a Trauma Insurance payment once a valid claim has been paid.
You might choose to use it to:
Keep paying the mortgage while you recover.
Take several months off work without the same financial pressure.
Replace some of your lost household income.
Pay everyday household bills.
Access treatment or rehabilitation.
Travel for specialist medical care.
Pay for additional childcare or help around the home.
Reduce your mortgage or other debt.
Give your partner or another family member the ability to take time off work to support you.
Or you might simply keep the money in the bank and use it to give yourself some financial breathing room while you recover.
Because recovering from a serious illness isn’t just a medical journey. For many families, it can be a financial one as well.
What Conditions Can Trauma Insurance Cover?
The conditions covered — and the definitions you need to meet to make a successful claim — vary between insurers and policies.
Depending on the policy, Trauma Insurance can include conditions and medical events such as:
Cancer
Heart attack
Stroke
Major organ transplant
Coronary artery bypass surgery
Multiple sclerosis
Kidney failure
Severe burns
Loss of vision
Loss of hearing
Paralysis
Comprehensive policies can cover dozens of different medical conditions and events.
However, simply being diagnosed with a condition doesn’t automatically mean a claim will be paid. The diagnosis must meet the specific medical definition contained in your policy.
That’s one of the reasons understanding exactly what you’re covered for is so important.
Cancer and Trauma Insurance
Cancer is one of the major reasons New Zealanders take out Trauma Insurance.
While New Zealand’s public health system and private Health Insurance can help with the medical side of treatment, a cancer diagnosis can create financial pressures that paying the medical bills alone doesn’t solve.
You may need to take months away from work.
Your partner might need to reduce their hours to look after you or the children.
You could have additional travel, accommodation, childcare and household expenses.
And through all of that, the mortgage and everyday bills don’t stop.
A Trauma Insurance payment can provide a financial buffer, giving you and your family more freedom to make decisions based on your recovery rather than simply what you can afford.
Heart Attacks and Strokes Don’t Just Happen in Old Age
It’s easy to think of heart attacks and strokes as something that happens much later in life.
Unfortunately, serious medical events can also affect people in their 30s, 40s and 50s — often when they’re in the middle of their careers, paying a mortgage and supporting a family.
And leaving hospital doesn’t necessarily mean life immediately returns to normal.
Recovery and rehabilitation can take months. You might return to work gradually, work fewer hours or need an extended period away from work altogether.
That’s where having money available outside of your normal income can make a significant difference.
“Isn’t That What Health Insurance Is For?”
This is one of the most common misconceptions we hear.
Health Insurance and Trauma Insurance do two very different jobs.
Health Insurance Pays for Treatment
Health Insurance is primarily designed to help pay for eligible medical treatment and services.
Depending on your policy, that might include:
Specialist consultations
Diagnostic scans
Surgery
Private hospital treatment
Certain cancer treatments
Other eligible medical expenses
Essentially, Health Insurance helps you access and pay for medical treatment.
Trauma Insurance Pays You
Trauma Insurance works differently.
If you suffer a covered condition and meet the policy definition, you receive a lump sum payment.
You decide what happens next.
You could use the money to replace lost income, keep paying your mortgage, support your family, reduce debt, fund rehabilitation or simply take the time you need to recover.
A simple way to think about it is:
Health Insurance helps pay for your treatment.
Trauma Insurance helps protect your financial life while you deal with it.
That’s why many New Zealanders choose to have both.
Do I Need Trauma Insurance?
There’s no one-size-fits-all answer.
Whether Trauma Insurance makes sense — and how much you might need — depends on your financial situation and the protection you already have.
It can be particularly worth considering if you:
Have a mortgage or other significant debt.
Have a partner or children who depend on you financially.
Rely heavily on your income to meet household expenses.
Own or operate a business.
Have limited savings available.
Would struggle financially if you were unable to work for several months following a serious illness.
For many people, one of their most valuable financial assets isn’t sitting in a bank account.
It’s their ability to earn an income for the next 10, 20 or 30 years.
A serious illness can put that ability at risk.
How Much Trauma Insurance Should You Have?
This is where good advice becomes important.
Simply choosing a round number — $50,000, $100,000 or $200,000 — doesn’t necessarily mean you have the right amount of cover.
We look at things such as your:
Mortgage and debts.
Household income.
Monthly expenses.
Savings and investments.
Existing insurance.
Family circumstances.
Ability to take time away from work.
Overall financial position.
From there, we can help determine what level of cover makes sense for you.
Already Have Trauma Insurance? It May Be Worth Reviewing
If you already have Trauma Insurance, that’s great — but it’s still worth reviewing from time to time.
Your mortgage may have changed. Your income may have increased. You may have had children, changed jobs, started a business or built up more savings.
Insurance products can also change over time.
The cover you arranged five or ten years ago may no longer reflect your current circumstances.
And importantly, don’t cancel or replace an existing policy without getting advice first.
Your health may have changed since you originally took out your cover, which could affect the terms available under a new policy.
The Bottom Line
Nobody expects to be diagnosed with cancer, suffer a heart attack or experience a stroke.
But if something serious does happen, the last thing you want is to spend your recovery worrying about how you’re going to pay the mortgage or keep your household running.
Trauma Insurance is about giving you money, choices and financial breathing room when you need them most.
Not Sure What You’re Covered For?
At NZ Advice Group, we can review your existing insurance and help you understand exactly what you have, what it covers and whether there are any gaps worth considering.
There’s no obligation to change anything.
Sometimes the best outcome from an insurance review is simply knowing that what you already have is right for you.
Get in touch with NZ Advice Group for a complimentary insurance review and find out how well your current cover would protect you and your family if the unexpected happened.