While life insurance is very important to have, in some ways it can become obsolete. Statistic shows that many people don't die quickly, instead they are often left with an illness or injury that can last for years. Life insurance is no good to you then, 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 experience one of the specified traumas in the contract. There are usually between 20 and 30 'trauma events', but the vast majority pay out on the main traumas - those being cancer, heart attack, coronary
bypass surgery and stroke.
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 your own
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 your financial planner.
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