Managing finances and insurance can feel like a complicated jigsaw puzzle at times. If you’re wondering how trauma cover and income protection can, or should, fit into your life, the first step is knowing the difference.

Income protection cover pays a regular benefit if you are unable to work due to illness, injury or disability. Payment is a percentage of your income, starting after a waiting period, for a set period of time – all chosen by you when you take out the cover.

Trauma cover (also known as critical illness cover) is a lump-sum payment, paid out if you are diagnosed with a covered illness such as cancer, or suffer trauma such as a stroke or heart attack. Payments are made regardless of whether you’re able to work or not.

Unlike income protection (and most other insurances), trauma cover provides a lump-sum payment to spend however you like:

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Taking time off work

Trauma cover pays out regardless of whether you’re still able to work, but financial help gives you valuable options. Taking time out means you’ll be able to focus on recovery without the financial stress.

Overseas travel

A holiday is a good idea any time, but they’re also proven to reduce stress, improve immunity and boost emotional stability.

Paying off the mortgage

Reducing the financial burden of debt during a serious illness.

Looking after the business

Allowing you to stop working while financial support helps the business carry on.

Looking after the kids

Arranging extra help around the home while you’re having treatment, financial support so family members can be away from work while caring for the little ones, or funding education costs.

Additional medical care

Funding additional medical care that might not be covered by the public health system or health insurance – like home modifications, personal medical equipment or new cancer drugs.

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Trauma cover and income protection serve different purposes, with all different insurances managing different risks. But they can also complement each other to ensure you’re covered for all those unexpected events life can throw at you.

How trauma insurance can work for you depends on your individual situation and objectives. If things have changed since you last reviewed your personal insurance, or if you don’t have any trauma cover in place, it’s a good idea to chat with a registered financial adviser. They can advise on your next piece of the puzzle, depending on your circumstances and budget. Our advisers work with a range of different policies and providers, and the service is 100% free to you.

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