Do you want to know how you can get paid a lump sum of money if you were diagnosed with a critical illness? Read on…

Trauma or Critical illness insurance enables you to be paid a lump sum amount of money on diagnosis of a critical illness (such as cancer, heart condition, stroke, major burns and up to 20 other conditions) whether you are working or not.
Other well-known conditions include multiple sclerosis, muscular dystrophy, quadriplegia and blindness.
It can be used to pay for treatments or medicines that aren’t covered through the Pharmaceutical Benefits Scheme (PBS) and therefore may not be covered through your private health insurance. It may also be used to cover other expenses such as child care, cleaning, or paying debts thus allowing you to focus on your recovery.
Why do you need it?
Many patients are surprised to learn that they could be paying thousands of dollars on treatments even by having the highest level of private health cover.
Unfortunately, this is an all too common occurrence, but having this extra coverage will ensure you don’t end up with financial difficulties.
Trauma insurance is not a replacement for income protection or private health insurance. It’s designed to help pay off debts, the costs of rehabilitation &/or childcare.
Did you know:

  • 43% of trauma/critical illness claims come from those age 40-49 years (AMP claims experience, 2012)
  • Most common cancer for Australians under age 45 is melanoma (BT, 2013)
  • Total of 4,512 trauma/critical illness claims were paid out in Australian during 2013 with total claims paid of $621.8 Million (the risk store, 2014)

What is it used for?

  • To pay for medical expenses not covered by Medicare or private health insurance.
  • To pay for someone to help look after the kids, clean the house, cook some meals, etc.
  • To pay out any loans you might have such as the mortgage.
  • To help pay for everyday living costs so that your spouse/partner can take some time off work to help you.
  • You could use the money to pay for specialists or medical bills, make modifications to your home, or cover rental payments.

Do your other insurances cover this?
The simple answer is – unlikely! Why?

  • Life/Death cover – only paid out if you die.
  • TPD cover – you must prove you are totally & permanently disabled and unable to ever work again – many people recover from their critical illness and therefore you cannot be paid out.
  • Income Protection cover – will only pay you 75% of your wages while you are unable to work and will only start paying after you serve your waiting period, which is usually 1 to 3 months depending on your policy.  A parent looking after the kids full time cannot get Income Protection cover.

Case study
Nicholas is married to Rebecca, who is taking time out of the workforce to look after their twin three-year-old boys.
Nicholas is employed and has already arranged a comprehensive package of insurances for him. However, they hadn’t recognised the importance of insuring Rebecca and the financial impact of this oversight hit home when she was diagnosed with breast cancer.
During the three years it took Rebecca to make a full recovery, they spent a total of $92,400 on childcare and help around the home. Also, things were particularly tough in the first two years, where these costs amounted to $38,400 pa. This represents a little over 50% of Nicholas’s take-home pay, leaving him with little money to pay the mortgage and meet their day-to-day living expenses.
The financial impact of Rebecca’s critical illness could have been reduced (or eliminated) if, after speaking to a financial adviser, she had taken out Critical Illness insurance to cover these and other costs. (MLC Smart Strategies, 2013/14)
What next?
If you would like to review your insurance needs, please contact Sofie Korac on (02) 8252-3207 or email to arrange a confidential, free consultation.
General Advice Disclaimer
Information contained within the above article is of a general nature only and is provided exclusively for the clients of GEM Financial Planning. Individuals should not act upon any such information without prior consultation with a qualified financial adviser to ensure that any action meets their personal financial needs, situation and objectives. No responsibility is accepted by GEM Advisers Pty Ltd or their representatives for those persons acting on information contained herein and persons do so at their own risk.
We believe that the information contained herein is accurate and reliable, being based upon GEM Financial Planning’s understanding of legislation at the date of publication. Legislation changes may occur quickly. Formal personal financial advice should be sought before acting in any of the areas discussed.
Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended. All expressions of opinion are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated.

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Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Gordon NSW

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