Having to deal with the event of being diagnosed with a serious illness both personally and for your loved ones can be difficult enough without the added burden of financial stress. Understanding not just the importance of Trauma Insurance, but also exactly what it covers, and the scenarios that you’re protecting against are vital when it comes to your own planning.

In this article, our team at Ally Wealth Management are unpacking exactly what Trauma Insurance is, what is covered, why you should consider holding trauma insurance, and how you can start to think about how much cover you should have in place.

What Is Trauma Insurance?

Trauma Insurance is cover that provides you with a lump sum payment if you are diagnosed with one of the critical illnesses that is outlined within the policy. The news of the above unforeseen illnesses being diagnosed is difficult enough for you and your loved ones without the added burden of not being able to afford treatment or to meet your family’s ongoing everyday expenses.

Trauma insurance is also known as critical illness insurance, and this is how it is described in some jurisdictions such as Singapore, however this does not mean that the cover itself is necessarily any different.

Why Do I Need Trauma Insurance?

Chances are you’ve already seen the alarming statistics of the likelihood of being diagnosed with a form of cancer, or some other serious illness. Cancer Australia estimates that one in every two males, and one in every three females will be diagnosed with some form of cancer before the age of 85, with some of the most common forms being prostate, colorectal, breast, melanoma (common in Australia) and lung cancer.

How much Trauma Insurance should I have in place?

When you’re considering how much trauma or critical illness insurance you should have in place, many people make the mistake of assuming that because they have health insurance that they don’t need this. It’s not just about covering the health treatment itself, but all of your other financial commitments such as your family’s living expenses, school fees, rent or mortgage repayments, and other costs that unfortunately can’t just be paused due to illness in most cases.

There is no one-size-fits-all approach to calculating your trauma insurance needs, which is why it’s important to work through this with a Financial Planner, but you should give thought to a range of aspects such as how much you and your family would need if you couldn’t work to cover aspects like rent or mortgage payments, school fees, groceries and utility bills, and other general living costs, as well as thinking about how these expenses may change over the short to medium term. For example, you may have a child going into private secondary school or university, which may result in a higher cost that should be factored in here.

You should also consider any liquid financial assets that you may be able to draw on if an emergency arose and you didn’t have another source of funding. This shouldn’t mean having to dip into your retirement savings, but you may have some shares or your emergency fund, that could be drawn on in the event that you needed it.

What Illnesses Are Covered By Trauma Insurance?

Many of the Trauma Insurance policies will cover individuals for approximately 30 major illnesses including cancers, heart attacks, strokes, tumours and other critical illnesses. The main illnesses covered often include the following:

  • Major Cancers
  • Heart Attack
  • Stroke
  • Blindness
  • Deafness
  • Coma
  • Paralysis
  • Coronary By-pass Surgery
  • Heart Surgery
  • Kidney Failure
  • Loss of Speech
  • Multiple Sclerosis
  • Hepatitis
  • Major Organ Transplant
  • Hypertension
  • Alzheimer’s Disease
  • Aorta Surgery
  • Major Burns
  • Terminal Illness
  • HIV Blood Transfusion
  • Lung Disease
  • Liver Failure
  • Muscular Dystrophy
  • Parkinson’s Disease
  • Aplastic Anaemia
  • Angioplasty
  • Bacterial Meningitis
  • Benign Brain Tumour
  • Encephalitis
  • Motor Neuron Disease 

What Are The Options To Consider For Your Trauma Insurance Policy?

As is often the case when it comes to insurance policies, there are many considerations for your policy, which include:

  • Exclusions of your policy
  • Waiting periods before you can claim
  • Stepped vs. Level Premiums
  • Linked to existing cover or not
  • Critical Illnesses that are covered
  • Limitations of your cover

Is My Employer Cover Sufficient?

Many employers in Australia and across the globe do not provide sufficient trauma insurance for their staff. This is often limited to Life and Total and Permanent Disability (TPD) insurance, so Trauma cover is often not included. In some cases for Australian expats in senior managerial roles, there may be an element of critical illness or trauma cover, however, it may not be sufficient in terms of the amount or the terms of the policy itself. It’s always important to review your employer cover and consider your options here.

In addition to reviewing what your employer does and doesn’t cover, it’s also important to consider scenarios of what could happen if you were to be diagnosed with a major illness and had employer cover that you could claim on. How long would your employer be happy to keep you on for while you’re not working? Is there a risk that your employment could be terminated resulting in you losing the rest of your insurance through your work? Often, the answer here is yes, which is why it’s crucially important to ensure that you’re exploring the possible scenarios with your Adviser and not leaving yourself unnecessarily exposed.

How can I pay for Trauma Insurance?

Trauma insurance is commonly held in a personal name, which means that it is funded from your funds outside of your superannuation fund. Due to the superannuation changes, which came into effect on 1 July 2014, Trauma insurance or critical illness insurance can not be held into your superannuation fund and paid for from funds into your super.

Who Do I Speak To About My Insurance?

As always, it’s important to seek the guidance and advice of an experienced Australian financial planner who can explore your options and ensure that you have the right trauma insurance based on your personal circumstances.



Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.

Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.

Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.

General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.