Why Do Only 3% of Australians have Trauma Insurance?

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.

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