Disclaimer – This article is for general information and education purposes only, not financial or legal advice. Trauma (critical illness) policies vary widely in their wording, definitions, and listed events. If you are thinking of lodging or disputing a claim about trauma insurance, consult a qualified financial adviser and/or insurance-claims solicitor for personalised advice.
Trauma insurance also called critical illness cover pays a lump sum if you are diagnosed with one of a set of listed medical conditions, or if you undergo a major medical procedure.
It’s not like TPD or income protection insurance: you don’t need to be permanently disabled or unable to work. Instead, your trauma payout depends entirely on whether your condition or procedure is listed in your policy and meets its definition.
This guide explains:
- What trauma/critical illness insurance is.
- Which conditions are typically covered in Australian trauma policies.
- How policy definitions determine eligibility.
- Common exclusions and traps to avoid.
- Examples of real-life trauma claims.
- A quick checklist to confirm your cover.
Trauma Insurance in Plain English
| Term | Plain English Meaning | Notes |
|---|---|---|
| Trauma insurance / critical illness cover | Pays a lump sum if you are diagnosed with a specified medical condition or event. | Claim depends on meeting exact definitions in your policy. |
| Specified event | A named condition such as heart attack, stroke, cancer, or kidney failure. | Wording matters: early-stage or minor diagnoses may not qualify. |
| Partial benefit | Some policies pay a smaller benefit for early-stage or less severe conditions. | e.g. early-stage cancer may trigger 25% of sum insured. |
| Exclusion | Conditions not covered at all. | Mental illness is almost always excluded. |
What Conditions Are Typically Covered?
Most Australian trauma policies list 30–50 conditions or events. While wording varies, the following categories are usually included:
Cardiovascular Events
- Heart attack (must meet troponin and ECG damage thresholds).
- Stroke (permanent neurological deficit required; TIAs are excluded).
- Coronary artery bypass surgery.
- Aortic surgery for aneurysm repair or replacement.
Cancers
- Major cancers (breast, lung, colon, prostate, others).
- Exclusions: early-stage cancer and carcinoma in situ are often not covered.
Neurological Conditions
- Multiple sclerosis (MS).
- Motor neurone disease (MND).
- Parkinson’s disease.
- Dementia (including Alzheimer’s disease).
Major Organ Failure or Transplant
- Kidney failure requiring dialysis.
- Liver failure.
- Lung failure.
- Major organ transplant (heart, liver, kidney, etc.).
Other Significant Events
- Severe burns.
- Loss of limbs.
- Loss of sight, hearing, or speech.
- HIV contracted through medical procedures or occupational exposure.
Partial Benefits for Less Severe Events
Modern trauma policies often pay partial benefits for early-stage diagnoses.
| Condition | Typical Partial Benefit | Notes |
|---|---|---|
| Early-stage cancer | 10–25% of sum insured | Does not trigger full payout. |
| Angioplasty with stent (1–2 vessels) | 10–25% | Full bypass surgery is usually needed for 100%. |
| Carcinoma in situ | Partial benefit if listed. | Many older policies exclude it entirely. |
Common Conditions Not Covered
- Mental health conditions – depression, anxiety, PTSD, bipolar disorder.
- Pre-existing conditions – often excluded if diagnosed before policy started.
- Minor events – small heart attacks without troponin elevation, mini-strokes without permanent impairment.
- Certain cancers – early or less aggressive cancers (e.g. low-grade prostate cancer).
Case Studies
Case 1 – Heart Attack Claim Approved
David, 52, experienced chest pain and was admitted to hospital. Tests confirmed troponin elevation and permanent ECG changes. His trauma insurer paid out his $200,000 cover.
Case 2 – Cancer Claim Disputed
Lisa, 45, was diagnosed with early breast cancer (carcinoma in situ). Her insurer denied the claim, arguing it did not meet the “malignant” cancer definition. With legal help, Lisa obtained a partial benefit under updated policy wording.
Case 3 – Stroke Claim Denied Over Definition
John, 60, had a transient ischaemic attack (TIA). Because he had no lasting neurological deficit, his claim was denied as the policy required permanent impairment.
Key Pitfalls to Avoid
- Assuming “cancer” means all cancers – most policies cover only advanced cancers.
- Not realising definitions are strict – e.g. “heart attack” requires specific test results.
- Confusing trauma with TPD – trauma pays on diagnosis; TPD pays if you can never work again.
- Assuming default trauma cover in super exists – many super funds don’t include trauma, or cover is very limited.
Fast-Track Checklist: Confirming Your Cover
| Action | Why It Matters | Evidence Needed |
|---|---|---|
| Review your PDS | Confirms the exact conditions covered. | Policy document. |
| Check for partial benefits | Early-stage diagnoses may only pay part of the sum insured. | Benefits schedule. |
| Clarify definitions | Ensures your diagnosis matches the insurer’s definition. | Specialist medical reports. |
| Identify exclusions | Prevents wasted claims. | Fine print in PDS. |
| Confirm sum insured | Know the size of your payout. | Policy schedule. |
FAQs
How many conditions does trauma cover?
Usually 30–50, depending on your insurer and policy type.
Does trauma cover mental illness?
No. Mental health conditions are almost always excluded.
Can trauma and TPD both pay out?
Yes. Trauma pays on diagnosis, TPD pays if you’re permanently unable to work.
Are trauma payouts taxable?
If held outside super, usually tax-free. If inside super, tax treatment can be more complex.
Key Takeaways
- Trauma insurance pays a lump sum on diagnosis of a listed condition.
- Commonly covered conditions: heart attack, stroke, major cancers, MS, kidney failure, major organ transplant, severe burns, loss of limbs/senses.
- Exclusions include mental health conditions, pre-existing illnesses, and early-stage or minor diagnoses.
- Definitions are crucial — many claims are denied because a diagnosis doesn’t meet policy wording.
- Partial benefits may apply for early diagnosis or minor procedures.
Trauma insurance (critical illness cover) can provide life-changing financial support if you suffer a major health event. But it’s not blanket cover for all illnesses — it only covers around 30–50 specified conditions.
To claim successfully, your diagnosis must exactly match your policy’s definitions. Partial payouts may be available for early-stage diagnoses, but mental illness and minor conditions are excluded.
At TPD Claims Lawyers, we help Australians lodge and dispute trauma insurance claims, especially when insurers rely on narrow definitions to reject payouts. If you need advice on whether your diagnosis is covered, contact us for a free, no-obligation assessment.
Last updated: 3 September 2025