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17 Mar 2022

What is ‘trauma insurance’ all about?

Have you ever heard of trauma insurance? Also known as Critical Illness Cover, trauma insurance is a powerful – and sometimes misunderstood – protection tool.  So here’s a summary of how it works, and how it can work for you depending on your needs.

What does it cover?

Let’s start by saying that, despite the name ‘trauma’ insurance, not all traumas are covered. That’s why critical illness cover is probably a more accurate way to call it.

In short, trauma insurance is designed to pay out a lump-sum amount if you’re diagnosed with one of 40-plus serious medical conditions or events, as listed in the policy. Covered conditions can vary widely from insurer to insurer, but things like cancer, strokes and heart attacks are usually covered. Plus, some events that are a result of accidents are also covered.

If you’d like to make the most of trauma cover, knowing and understanding the fine print is all-the-more crucial. And as insurance advisers, we can help you do just that.

You can use the insurance payout as you like

Unlike income protection, you don’t have to be unable to work to receive your trauma insurance payment. This is paid upon diagnosis, and you and your family can use it as you wish. Some people, for example, take out enough cover to repay their mortgage in full. Others use it to fund a much-needed holiday with their loved ones, for experimental treatments, or to be able to afford some time off work while focusing on their recovery.

This flexibility is what makes trauma insurance such a powerful safety net. 

How to structure your trauma cover

There are essentially two ways to structure your trauma insurance: stand-alone or accelerated. Here’s the difference:

  • Stand-alone trauma insurance: As the name suggests, you can take out trauma insurance on its own, just like any other insurance policy. This means that, if you suffer a covered condition and make a valid claim, your cover will be paid out without affecting any other cover you may have. This option usually costs a bit more than its accelerated counterpart, but it can give you more certainty over your life insurance.

  • Accelerated trauma insurance: If you’re on a budget, you can get trauma insurance packaged with life insurance. If you make a claim on your cover, the amount of trauma insurance will reduce the amount of life insurance you have. For example, if you have $700,000 worth of life insurance and claim $200,000 of accelerated trauma insurance, your life insurance amount will reduce to $500,000. Compared to the stand-alone trauma option, the ‘accelerated’ premium is usually lower.

You may be able to restore your cover

In general, you can only claim once on your trauma insurance – unless you add a reinstatement option to your policy. Most insurers allow clients to buy back their trauma protection 12 months after they make a claim. And if your cover is accelerated, you may also be able to restore your life insurance after 12 months.

Keep in mind that these are optional extras; if you’d like to make sure that your policy includes them, get in touch. We can help you find a solution that’s suitable for your needs and budget.

When is trauma insurance a good idea?

The answer depends on your circumstances. When considering whether trauma insurance is for you, think about what would happen if you suffered a serious condition like cancer or a stroke. 

Would you be able to pay your bills or other expenses, like your mortgage? Would you like to spend more time with your family? If you have a business, would you like to receive financial support to cover your ongoing overhead costs? 

We’re here to help

These are just some of the key things to think about. If you’d like to discuss your options in more detail, please don’t hesitate to contact us. We’re here to help. 

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.

Link Financial Group Ltd trading as Mortgage Link and Insurance Link FSP 696731 holds a licence issued by the Financial Markets Authority to provide financial advice. Insurance Link (NZ) FSP 446867 is authorised by that licence to provide financial advice. Please visit for more information and Disclosure information.