Trauma insurance – life insurance for the living

Trauma or critical illness cover is one of the life insurance industry's best kept secrets. That's because it is insurance for the living and pays cash so if the insured person suffers a serious illness or injury covered by the policy they can carry on with their life. In this article we look at the origins of the insurance and how beneficial it can be to the financial survival of your clients.

Tuesday, May 19th 2009, 4:00PM

by Mark Ennis

Trauma is still a relatively new form of insurance.  Interestingly, it was developed as recently as 1984 by Marius Barnard, brother of the South African heart transplant pioneer Dr Christian Barnard. The catalyst was seeing the financial cost his brother's patients and their families incurred by surviving serious heart conditions.

The concept behind trauma cover is excellent. It pays a lump sum benefit when the policyholder is struck by some of the most common and probably most-feared illnesses or afflictions, such as;  cancer, coronary disease, heart attack, paralysis, organ failure, Parkinson's and stroke. Its main value is that it helps remove some of the main barriers to recovery - stress and not being able to afford the treatment you want, when and how you want it.

People are now living longer and increasingly surviving illnesses and conditions which were once more likely to be fatal. While dying prematurely is still the risk most people insure against, the greater risk to a family's financial security maybe being incapacitated and unable to work and running up some hefty medical bills. Surviving a critical condition can leave people, and the families who depend on them, financially crippled. One of the distinctive features of trauma insurance is that it pays out on diagnosis rather than the outcome.  It offers a solution to cover the financial consequences of an event occurring.

While trauma can be sold as a standalone cover, it is more usually sold as a rider to some other form of cover such as term life or income protection.  When comparing competing companies' trauma products, don't just focus on which policy has the longest list of covered conditions, look at the policy definitions and fine print to ensure it offers cover for the conditions that are most likely to occur.

The crucial point to focus on is how easy or difficult is it to get a payout if someone is struck by the "big five" - cancer, heart attack, coronary artery disease, stroke and angioplasty.  80% of AXA's trauma claims in 2008 were for these five illnesses. A Trauma policy like AXA's offers real value and covers illnesses most likely to be claimed. In short, check out how well the product you are looking at covers the basics before looking at the bells and whistles. 

Important Note: The information contained in this article is based on AXA’s current understanding of the legislation.  This is general information only and is not intended to be financial advice. For information about AXA products or a copy of Policy Documents including definitions, terms & conditions and exclusions, please ask your financial adviser or contact AXA. Applications will be subject to approval by AXA Underwriting. AXA New Zealand (The National Mutual Life Association of Australasia Limited). A disclosure statement is available from your financial adviser on request and free of charge. www.axa.co.nz

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