Trauma insurance, explained
Trauma insurance (also called critical illness cover) pays a lump sum on diagnosis of a defined serious condition — heart attack, stroke, major cancer, kidney failure, paralysis, organ transplant, severe burns, plus around 30-50 other conditions depending on the policy. The lump sum is paid regardless of whether you can or can't work — payment is triggered by the diagnosis itself. Standard cover amounts $200-500k.
It sits in a niche between income protection (which pays during incapacity but has waiting periods and benefit period limits) and TPD (which pays only on permanent disability, usually any-occupation). Trauma fills the 'serious illness, will recover, but disrupts everything for 12-24 months' gap. Cancer is the most common claim — survival rates are good for most cancers but treatment can take 1-2 years and out-of-pocket costs (PBS gap fees, non-PBS drugs, alternative therapies, travel for specialists) often run $30-80k above what Medicare and private health cover.
The need is harder to size than life or TPD. The framework above: income replacement during expected recovery + debts to clear + non-Medicare medical out-of-pocket, less liquid savings. For most working-age Australians with mortgage and dependents, that lands somewhere in the $200-400k range. Trauma cover via super is rarely available; most retail trauma is purchased standalone outside super. Pair this with our Income Protection Calculator and TPD Calculator.