As a 37 year old male, there is a 22% chance that I will suffer a trauma by the age of 65. That’s basically a 1 in 5 chance! (Source: Risk Tool in XPlan)

The reason the take up of trauma insurance is so low has to be awareness. Years ago I worked in a funds management business. I was amazed by how few of the staff actually invested in the funds our business managed. I wonder if it is the same with trauma insurance for those working in financial services? If those who understand how it works don’t take it out, it’s no wonder only 3% of Australians have it!

I know from talking to clients that many have never heard of it. It used to be that life insurance was the most important cover to have. If you had a major illness you were far more likely to die from it. With medical advancements over the past 20 or 30 years, you are now more likely to survive cancer or a heart condition. And while there are many events that trauma insurance covers, the majority of claims are in relation to cancer, heart attack, stroke and heart bypass surgery.

A few years ago I switched the premium on my trauma insurance from stepped to level. Over the next 28 years I will pay about $2,000 pa (or $56,000 in total) for my $500,000 of lump sum cover. By putting my cover on level premium, I pay more now but the cost doesn’t increase as I get older. In doing so the cover will still be affordable as I get older and am at a higher risk of trauma claim. Many people either reduce or cancel their cover when they need it the most simply because they can’t afford it.

Posted by Dave Rae

CERTIFIED FINANCIAL PLANNER

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