Many people think that life insurances are limited to death cover, total and permanent disability cover and income protection cover. But there is a fourth kind of life insurance that is often overlooked – but that can be very useful in certain circumstances.
You may have heard of trauma cover. As the name suggests, trauma cover is a form of insurance under which you receive a benefit if a specified trauma occurs. The trauma can be either an illness or an injury. If you experience that illness or injury, you receive a benefit – usually regardless of whether or not that illness or injury actually caused you financial loss. The idea is that illnesses and injuries of that type typically cause financial loss, if for no other reason than the need to pay medical expenses. So, the insurer creates a policy under which you are paid if the traumatic event occurs.
If you receive a benefit, you are usually not limited in how you can spend that benefit. So, if the amount of benefit exceeds the medical costs, you can keep the difference. The only thing you need to verify is that the traumatic illness or injury occurred – you do not have to justify your expenses.
Many policies allow you to select those illnesses or injuries that you wish to be covered for. Other policies are more prescriptive. There can be some variation in the illnesses and injuries covered by a particular policy. The following list comes from one of the insurers and shows the types of illnesses and injuries that may be covered. As you can see, the list of traumatic illnesses or injuries can be written very broadly. Under this policy, anything that sees you admitted to an intensive care unit would qualify you.