Trauma Insurance vs Health Insurance: What's the difference?

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Everyone gets sick at some point in life, whether it’s a stomach bug, a chronic disease, or something more serious, such as man flu! Just joking.

However, choosing the right insurance policy to protect you from the financial impact of a severe illness can be tricky, particularly given the variety of policies available.

It’s common for people to believe that they don’t need trauma insurance if they have health insurance.

That isn’t the case, surprisingly. Instead, health and trauma insurance are two sides of the same coin. 

The difference is what they cover, how they payout, and who receives the money. 

Yet, both are vital in getting us through life’s difficult moments and on the road to healing and recovery.

So, what exactly is the difference between trauma insurance vs health insurance?

Understanding Trauma Insurance

Trauma insurance is designed to protect you and your family financially if you or a loved one is diagnosed with a severe sickness or medical condition. It provides a tax-free cash lump payment to keep your finances afloat while recovering. And if unable to work, trauma insurance may work as an income replacement.

Trauma Insurance is something to consider if you and your family rely on your income for a living and don’t have enough funds to fall back on when you become gravely ill. Some policies even payout if your child gets sick, allowing you to be there for them when they need you most.

What's covered by trauma cover?

Trauma insurance covers a variety of illnesses and conditions, depending on the policy and insurer. However, the majority of trauma insurance policies will cover:

  • Cancer, sadly there are so many, including prostate cancer, malignant tumour and melanoma and more.
  • Heart attacks and coronary bypass surgery are two examples of heart disorders.
  • Stroke, Alzheimer’s disease, and Multiple Sclerosis are all neurological disorders.
  • Chronic renal failure and major organ transplants are examples of organ illnesses.
  • Aplastic anaemia, for example, is a blood condition.
  • Blindness, hearing loss, speech loss, and limb loss are permanent conditions.

Benefits of trauma insurance

  • Extra funds:
    Trauma insurance is a one-time cash tax-free payout. Having that extra buffer of money in the bank allows you to focus on healing and planning for the future.
  • Flexibility:
    You can use the money as you wish, whether for medical treatment, house improvements or vacation. It’s entirely up to you.
  • Reduce financial stress:
    If you cannot work for an extended time, this can relieve financial stress.

Understanding Health Insurance

Health insurance pays for covered expenses rather than giving you cash when you require medical care. Depending on your policy, your insurer may pay the doctor or hospital directly or refund you for your already made payments.

In New Zealand, health insurance covers your medical expenses, offers you priority for treatment, and helps you cover the costs of surgery; hospital stays, doctor visits, prescription drugs, and other necessary preventive care.

What's covered by health cover?

Different health insurance plans offer various benefits. You can get personal advice and recommendations to help you through the process of finding a policy that suits your needs. Most insurance policies include cover for:

  • Surgery – big-ticket medical costs and treatments in private hospitals
  • Out-patient care such as scans, tests, x-rays and hospital appointments where you aren’t admitted
  • Faster access to treatment and diagnosis when and where you want
  • Non-Pharmac funded treatment and medication
  • Cancer treatment

When you compare health insurance, you might need to consider the needs of family members too. For example, some insurers offer discounts if you insure your children.

Benefits of health insurance

  • Priority treatment access:
    Health insurance allows you to get private health care with little to no wait times.
  • Better treatment choices:
    Funds for Non-Pharmac medications, many of which are essential for treating certain malignancies and other illnesses but are not covered by the public health system, are available under several health policies.
  • Less financial stress:
    Less financial stress by reducing your costs of private treatment.

Comparing Trauma Insurance vs Health Insurance - which one do I need?

Unlike trauma insurance, which pays out a lump sum if your illness meets the policy’s conditions and can be spent however you want, private health insurance only pays out on expenses incurred, such as doctor’s bills or hospital theatre fees. And you might still be expected to pay the excess.

Trauma insurance isn’t meant to be a substitute for private health insurance. Instead, it’s intended to cover the financial costs of a medical diagnosis.

When a critical illness, such as cancer, stroke, or heart attack, is diagnosed, trauma insurance coverage pays out a lump sum benefit. This benefit can help cover things like out-of-pocket medical costs and replace your spouse’s loss of income if they have to take time off work during treatment. The economic strain varies greatly depending on the type of illness and its severity, going from the tens of thousands to the hundreds of thousands of dollars.

Therefore, having some private insurance is preferable to having none, and you will know your situation better than anybody else. 

Getting advice and recommendations from a specialist insurance advisor is always a wise choice because they know the insurance market and can find the best trauma policies to match your needs and budget.

Key Points

  • Both health insurance and trauma cover protect you in the event of illness, but how they payout is different.
  • Trauma cover pays out a tax-free lump sum that you can spend however you want; health insurance pays your medical bills.
  • Anyone would benefit from having health insurance or trauma cover in place
  • You can get both types of coverage or select the most appropriate one for you, your circumstances, and your medical history.
  • An adviser can help give advice and recommendations about the most suitable cover for you.

FAQ's

Is health insurance better than critical illness cover?

Trauma insurance and health insurance are two different types of insurance that support you in different ways. Therefore it’s difficult to tell which is better. Which one is best for you depends on your situation and which risk scenario you’d like to have covered. If you have the funds, you may have both covers.

Can you claim trauma insurance and health insurance at the same time?

You can claim both health insurance and critical illness benefits simultaneously, as long as both claims are eligible. To submit a successful critical illness claim, you must be diagnosed with one of the illnesses covered by your policy. When it comes to health insurance claims, you can request pre-approval or reimbursement after the event or operation for which you want to file a claim.

Do I need both trauma insurance and health insurance?

Health insurance and trauma insurance are two different types of cover. 

Suppose you’re diagnosed with a severe illness. 

In that case, trauma insurance pays you a one-off sum of money to support you financially while you are healing.  

Your medical procedures are covered by health insurance and paid for by the insurer. 

It’s up to you to decide which situation you’d like to be covered for. Still, it’s critical to understand what each type of insurance provides before selecting.

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