Trauma insurance helps the living through tough times

MEDIA RELEASE

March 31, 2011

Trauma insurance helps the living through tough times

More than half of New Zealanders are likely to be alive five years after receiving a cancer diagnosis.1 But while more than half of families typically have life insurance, just 18 per cent have trauma insurance.2

A critical illness can hit New Zealanders at any time of life. While Kiwis increasingly understand the wisdom of taking out life or income protection insurance, they often neglect to consider how they might cope financially should they be diagnosed with a serious illness, suffer a bad accident or undergo major surgery, said Milton Jennings, chief executive of New Zealand-owned insurer Fidelity Life.

“Insurers are far more likely to promote life assurance than trauma cover,” said Mr Jennings. “People should consider whether trauma cover may be beneficial to them and their family in the short to medium term, in addition to life insurance.

“Trauma insurance is important not because you’re going to die, but because you’re going to live. Major medical events are almost always life changing. Trauma insurance pays you an upfront benefit to go towards things like mortgage repayments and day to day living expenses, as well as those extra hospital and medical fees incurred because of the serious illness.”

Fidelity Life’s latest claims data shows that the four most common claims under trauma insurance policies are for cancer, heart attack, coronary bypass and stroke. The chance of suffering a physical trauma during your working life is higher than you might think. For example, the odds of suffering from cancer before the age of 65 are one in five for men, and one in seven for women.3

“Our latest claims statistics show that the average age of those claiming on trauma cover is just 47 – so it’s certainly something that those entering their middle years should think about purchasing well before any event occurs.”

The youngest claimant for critical illness insurance was 29 years old, while the oldest was 68, according to Fidelity Life’s claims data for the 12 months ended June 30, 2010. The average claimant received more than $30,000 for the 12 months ended June 30.

For women, 83 per cent of claims were for cancer and, of these, 59 per cent were for breast cancer. That’s compared with 54 per cent of males claiming for cancer.

By way of contrast, some 34 per cent of men claimed for heart disease and just 11 per cent of women put a claim in for heart disease.

“A person suffering from one of the four main critical illnesses has a nearly 50 per cent chance of surviving for up to 10 years beyond the critical incident,”4 said Mr Jennings. “So you should be thinking about your own quality of life during the time you are sick or otherwise incapacitated – how are you going to pay your mortgage, take care of your children, and cover your expenses during any period of reduced working capacity.

“A lump sum benefit can make a real difference in meeting the regular expense, along with any additional medical costs.”

“The diagnosis of a serious illness is devastating in any circumstances, but the burden will be far greater if your financial security is also put at risk,” said Mr Jennings. “Although 1-in-4 men and 1-in-5 women will suffer a serious illness before age 65,5 current survival rates mean that many patients go on to make a full recovery and enjoy a good quality of life.”

The cost of cover is affected by a range of variables including age, gender, occupation, general health, lifestyle habits, the sum insured, and the events or diseases covered. As an indication, a non-smoking, 42-year old female, in good health wanting trauma insurance coverage up to $250,000, could expect to pay a monthly premium of anywhere from $65 to $105.

Case study - Good advice and trauma cover

Roger agreed to have an adviser look over his current insurance cover for his borrowings to see if, firstly, he had sufficient cover and, secondly, if he could get a better deal. This proved to be a very beneficial first step and led to him taking out a new policy.

It turned out that he didn’t have sufficient insurance if he died to cover all of his borrowings, plus he had no trauma or income protection policies. When he saw the quote and how little more it would cost to more than fully cover his borrowings, as well as cover for any potential trauma or loss of income, he was very happy.

The new premiums were not a lot more than what he was paying, and for a fraction of the cover. Roger was pleased he took this policy out as, six months’ later, he was diagnosed with operable cancer. He had to be off work for a number of weeks to undergo a course of chemo/radio therapy and then have surgery with further recovery time.

Thanks to the policies, he received the one-off trauma payment to offset the ongoing loss of income. This meant he could recover without the burden of the financial pressure on him and his family. Though there was the usual paperwork involved in claiming, it was a smooth process in dealing with the insurance company.

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