Trauma Insurance is often the last policy clients think about. It’s also one of the most important if someone suddenly becomes ill or injured. Jeff Scott, Head of Advice Strategy, and Janhvi Chadha, Product Manager Retail Life Insurance, explain MetLife’s trauma offering.
What is Trauma Insurance?
Janhvi: Trauma Insurance pays a lump sum benefit if a client suffers and is diagnosed with a specified medical condition. Common conditions include cancer, heart attack, and stroke.
Jeff: It was developed in the 1980s by South African heart surgeon Dr Marius Barnard to help cover the cost of medical bills, "I can make people better after the heart transplant,” he said. “But I bankrupt them financially."
In Australia, this is less of an issue because we have Medicare and private health insurance, but for out-of-pocket expenses such as paying off debt, modifying the family home, or medical expenses gaps, Trauma Insurance is ideal.
How does MetLife’s Trauma Insurance work?
Jeff: The way it works is simple: If a policy owner has suffered a health trauma or been diagnosed with a specified medical condition, they can lodge a claim. For example, if someone has a heart attack and survives 14 days, they just need to show medical proof and submit a claim. When a claim is paid, MetLife doesn’t stipulate how the money is spent.
With other types of insurance, such as Total Permanent Disability (TPD) or Life Insurance, people have to meet the policy terms or die. TPD and Income Protection both have a work test. If a person can work at full capacity, those benefits stop; whereas if they are partially disabled, benefits continue for Income Protection.
How is MetLife’s Trauma Insurance different?
Janhvi: The unique quality about MetLife's Trauma Insurance is our Trauma Cover Reinstatement Option. A policy owner can receive a full benefit payment on five separate occasions based on the categories of Cancer Conditions, Heart Conditions, Neurological Conditions, Vital Organ and Digestive System Disorders, and Disability Conditions and Accidental Incidents.
This means if someone suffers more than one unrelated serious medical condition, MetLife may pay the full benefit up to five times. With other trauma contracts you may only reinstate your Trauma Cover once, while some will reinstate up to three times.
Why did MetLife decide to offer Trauma Cover Reinstatement?
Jeff: We’ve implemented this feature because research if someone suffers one traumatic event, the chance of them suffering another unrelated trauma event is around one in five.
This policy was put in place in 2018 after we looked at medical research and what other companies offer. We noticed Trauma Insurance hadn't changed in about 20 years, but medical technology, advancements and research had, so we changed too.
Are there waiting periods between claims of this kind?
Janhvi: When a full benefit is paid under standard Trauma Cover, the other four categories can be paid over the ensuing 12 months if the condition occurs due to an accident.
12 months after the original claim is paid, the remaining four categories return to full cover amounts for a medical condition due to illnesses as well as accidents.
What is the Trauma Insurance tier benefit system?
Jeff: Other insurers offer Trauma Insurance as a lump sum payment. We have that option as well. But we also pay depending on severity. For example, if a person is diagnosed with a specified medical condition , we pay a portion of their benefit, which means they may still have the ability to claim again.
Janhvi: Other companies can say, “you don't have the right severity of the cancer, so you get nothing.” It’s awful when a person suffers a trauma condition and is told, "Sorry, it isn't bad enough for us to pay."
For example, if a client is diagnosed with cancer, we assess the severity. Depending on the severity, they may get 10%, 50% or 100% of their cover amount.
MetLife Trauma Insurance tiers:
- Tier 1 = up to 100%
- Tier 2 = up to 50%
- Tier 3 = up to 10% for Cancer Conditions and up to 25% for Heart Conditions, Neurological Conditions, Vital Organ and Digestive System Disorders, and Disability Conditions and Accidental Conditions
* Terms and conditions apply. Please refer to the Supplementary Combined Product Disclosure Statement and Policy Terms.
Is Trauma Insurance included in super?
Jeff: Possibly. Policies taken out before July, 2014, may include Trauma Insurance. In July 2014, the Superannuation Industry Supervision Act was amended, removing Trauma Insurance from being offered inside superannuation. Currently, if clients want this type of insurance, they need to buy it outside superannuation.
What are some common misconceptions around Trauma Insurance?
Jeff: Some people are unaware of Trauma Insurance because they have Life Insurance inside their super and think it’s enough. They may also be aware of TPD and Income Protection inside their super, but it’s a good idea to encourage them to check. Some people think Trauma Insurance is used to reimburse medical expenses and that it’s a health insurance equivalent. Alternatively, they think it’s based on if they can work, or that it’s like TPD and Income Protection where there's a work test that determines if they’ll be paid. Trauma Insurance is simply, "Have you suffered or been diagnosed with that medical condition?” It's not a reimbursement of health expenses and it's not a replacement for your income.
How does Trauma Insurance pay out?
Janhvi: Trauma Cover is paid out as soon as MetLife receives the medical reports from a doctor or specialist confirming the client is suffering or has been diagnosed from the specified illness or disease. A 14-day survival period is applicable to all Standalone Trauma Cover and associated Extras. MetLife makes a lump sum payment to the client's nominated bank account.
Why should clients pay for this type of insurance?
Jeff: We know for a fact one in six Australians will suffer cancer, heart attack, stroke or some other traumatic condition before age 65. As a result, Trauma is probably the most expensive insurance compared to other cover types and the premiums are usually higher than Life or TPD. Unfortunately, when clients have budget constraints, Trauma Insurance usually gets pushed to the side. However, it's worth explaining this type of insurance gives them more options to reduce the financial impact of suffer a trauma condition. Trauma Insurance can help them focus on recovering by giving them money to pay down their debts, fund ongoing living expenses, access medical care in Australia or overseas and other out-of-pocket expenses. People tend to think, “I've got health insurance, and I’ve got Medicare. What more do I need?" But if someone is going through chemo, for example, a trauma payment means they can afford to pay for a cleaner, someone to walk the dog, and order dinner when they’re not feeling well. While Income Protection replaces 75% of income, an initial trauma payment means clients can draw on that money to pay for those lifestyle benefits.
When do people tend to start thinking about Trauma Insurance?
Jeff: TPD and Trauma are often the last types of insurance people tend to think about. Clients see that Life Cover pays off debt and looks after the family, and Income Protection looks after their earning capacity. It’s when they get married, start a family, or have a mortgage that it becomes more of a consideration. Sometimes the trigger is a close friend, family member or perhaps even someone in the public eye suffering a traumatic event. For example, the increase in breast cancer screenings tripled after Kylie Minogue announced she had breast cancer.
Is mental illness covered under Trauma Insurance?
If a claimant meets one of the specified trauma conditions (for example Loss of Independence) as a result of their mental illness they could be covered under their Trauma policy.
Are there medical exams when you apply for Trauma Insurance?
Jeff: Yes. There's usually a blood test and a questionnaire you need to fill out. Pre-existing medical conditions and family history will also play a part. For example, if you have a family history of cancer, especially before age 65, that will impact your rating. It doesn’t mean you can’t get the insurance. It just means it may be more expensive because we price policies against associated risk. But if you're in good health, have a healthy BMI, and your cholesterol is good, your premium will likely be lower.
What family extras may be included with a Trauma Insurance policy?
Jeff: Family Extras is designed to cover children. We’re finding more parents are getting Trauma Insurance for their children, and there's no underwriting for them.
It’s not so much the medical bills if your child is sick due to a specified medical condition , but if your child is going through a significant situation, you want to be able to take the time off work to be with them either at home or in the hospital. Some people think it’s morbid to insure your child, but it's actually a good financial decision. If you have to take time off work but you're not sick, your Income Protection won’t cover you, but a trauma payout will give you that financial freedom.
Who needs Trauma Cover?
Janhvi: Everyone. Especially anyone who still needs to work to provide for themselves and their family.
Jeff: A client younger than 35, with no dependents, no debt, and who lives alone may think they’re bulletproof. But if they suffer cancer, a heart attack, or break their back and become paralysed, Trauma Insurance means they can make lifestyle choices such as paying for alternative medicine, paying off property, and providing the freedom to not move back in with mum and dad.
Even if it’s only $50,000, it’s money in the client’s pocket and they can choose what you do with it.
What do advisers need to think about when calculating how much insurance someone needs?
Jeff: It comes down to your client’s needs and circumstances. It can be useful to help clients understand out-of-pocket expenses for conditions such as cancer, heart attack, stroke, or becoming paralysed. For example, the Institute of Health and Welfare says out-of-pocket costs for paralysis over a person's lifetime are more than $1 million. However, for cancer, heart attack or stroke, it's usually less than $100,000. It depends what your client wants the money for: if it's purely for out-of-pocket expenses for anything other than paralysis, $100,000 is probably enough. If they want to pay off debt, then it's out-of-pocket expenses plus their debt. That can include the mortgage, which is probably the most significant debt most people have. As a minimum, we normally suggest $50,000 because that gives clients some capital to play with.
Contact your BDM to learn more about Metlife's Trauma Insurance