When you are fit and healthy and enjoying life, planning for a medical event is one of the last things on your to do list. Unfortunately, cancer, heart attack and stroke make up 90% of trauma cover claims and impact a vast number of Kiwis each year. According to SunSmart NZ, 80,000 Kiwis are diagnosed with cancer each year, the Heart Foundation of NZ reports 1 in 5 adults are living with cardio vascular disease and the Stroke Foundation NZ states that strokes are New Zealand’s leading cause of serious adult disability. AdviceFirst adviser James Polson explains how Trauma Cover can be an invaluable Plan B for when critical illness impairs your ability to earn an income.
“Nobody wants to have to think about this kind of thing, but critical illness is something none of us can afford to ignore,” says James. “If you have a medical event and you’re not able to work as usual, your costs of care and living can mount up quickly.”
Simon*, aged 61, is married and has four dependent children. As is the case with most people with young families, Simon’s financial priorities were costs of living and paying off his mortgage. He understood the need for insurance but was keen for us to restructure his policy so that he could reduce costs but retain higher levels of cover. While reviewing Simon’s situation we discussed his health and he mentioned he had a heart related event in the past 2 years. Simon didn’t think this was worth contacting us about at the time as he thought he wouldn’t be entitled to make a claim since he did not pass away or have to take unpaid leave from his job. However, his insurance policy included a “specified illness” benefit, and we were able to help him claim $30,000 as a lump sum payment. It was apparent to Simon having this benefit in his insurance policy was invaluable.
James says Simon is not alone in assuming he was not entitled to claim as it’s easy to get Life Insurance and Trauma Cover (sometimes known as critical illness insurance) confused.
While each policy is slightly different, Trauma Cover generally provides a lump sum tax-free pay-out if you are diagnosed with one of your policy’s specified illnesses or condition. Trauma Cover can work well in conjunction with other insurance like Income Protection. This money can be vital – the bills don’t stop coming just because you aren’t working, and it could mean your partner could also take time away from work to help care for you. The payment could also be used towards the costs of treatment, here in New Zealand or overseas, or even an extended family holiday as part of the recovery.
“Trauma Cover can take away a lot of the financial pain caused by suffering a critical illness so you can focus on getting better instead of worrying about your medical and recovery costs,” says James.
So how much Trauma Cover should you take out? “The purpose of the cover is to provide a Plan B,” says James, “Everyone’s situation is different and that’s why consulting with a financial adviser experienced in Life Insurance will help you determine how much cover is right for you. Trauma Cover varies slightly between providers so an adviser will also be able to help you find the right policy and understand what is and isn’t covered. Most importantly, you need to be completely comfortable before taking out a policy so don’t ever be afraid to ask questions.”
For more information about Trauma insurance contact an AdviceFirst adviser by completing this form. Alternatively, you can call 0800 438 238.
*Not his real name.