Is trauma insurance worth it?

The case for trauma cover is that a serious diagnosis creates costs that no other product covers. Income protection pays a monthly benefit but only after a waiting period and only while you are unable to work. Health insurance pays for treatment. Neither hands you a lump sum you can use to clear the mortgage, fund a partner’s time off, or simply stop for a year.

The case against it is that you are paying for a list. A trauma policy responds to the conditions in its schedule, on the definitions in its schedule. Serious illnesses that are not on the list, or that do not meet the definition, pay nothing — while income protection responds to any illness or injury that stops you working, which is a much wider net.

Both cases are true, which is why the answer depends on the household rather than the product. The honest version of the advice is that trauma is a good third purchase and a questionable first one.

Trauma cover usually earns its premium if

• You have a mortgage large enough that six months of reduced income would be a serious problem.
• You have dependent children and a partner who would need to reduce their hours to provide care.
• You are self-employed, with no sick leave and income that stops when you do.
• Your liquid savings would not cover more than a few months of household costs.
• You have income protection already, and want a lump sum on top of a monthly benefit.

It is harder to justify if

• You have no dependants, no debt, and savings that would carry you through a year.
• You have no income protection and can only afford one product — income protection covers more events.
• The premium is high enough that you would realistically cancel it within a few years.
• You are close to retirement, with the mortgage repaid and no earned income to protect.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether the premium is stepped, and what it will look like at 60 rather than at 40.
• Whether the cover is accelerated against life cover, and what your plan looks like after a claim.
• Whether the sum insured is sized to a job — a year off work, or clearing a portion of the mortgage.
• Whether income protection would be a better use of the same premium.
• Whether the policy pays partial benefits for early-stage conditions, which changes the odds of ever claiming.
• Whether the cover expires before you expect to need it, which is common on trauma benefits.

Every New Zealand insurer writes trauma insurance in new zealand to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• An adviser can price trauma and income protection side by side, which is the comparison that actually decides the question.
• Where budget is limited, splitting between a smaller trauma sum insured and a longer income protection benefit period often produces a better outcome than either alone.
• Level premium trauma is available from some insurers and changes the long-run affordability picture substantially.
• A good adviser will tell you when the answer is that you do not need it — and that conversation is free to have.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.