Trauma insurance is a lump-sum amount paid upon diagnosis of specific illnesses. A large majority of Trauma claims are for cancer, strokes and heart attacks, but most modern Trauma insurance policies cover over 40 conditions. In fact, as insurers compete with each other and add other conditions, they are making Trauma cover less affordable. More conditions = more claims = higher premiums.
Added to this are the age-related increases. $100,000 of Trauma cover at 40 is around $30 for a non-smoker, but this will triple for a male by age 50 and will be almost 10 times by age 60. Premiums for women increase at a lesser rate, but the increases in your 50s are still eye-watering. It is somewhat ironic that an insurance that helps you if you have a heart attack could actually cause one when you get the annual renewal!
There are two ways to manage Trauma cover as you age, apart from just cancelling the policy. One is to gradually reduce the amount of cover. The other option is to split your Trauma into two different types. Let’s call them Standard and Severe. If we stick with heart attacks, receiving $100,000 if you have a minor heart attack would be nice, but will you need it? What about for a severe heart attack? You might need even more.
Severe Trauma insurance costs about 25% of Standard Trauma, as it generally has a higher claim threshold. To keep premiums affordable, you could replace some of the Standard Trauma with Severe Trauma, say split 50/50 to start with. Then every few years just move more of the Standard Trauma to Severe Trauma. This approach will keep you covered for longer, without breaking the bank.
Mark Lynch is a Financial Adviser. His Disclosure Statement is available free upon request. Any comments in this column are the opinion of the writer and should not be construed as financial advice.