These types of cover are not the same – so what is the difference between Income Protection Cover and Trauma Cover? They both cover very different events, and consequently many people choose to have both types of cover.
Simply, income protection provides a benefit if you are unable to work due to illness or injury. Trauma cover provides an early lump sum payout if you suffer from a condition specified in your cover policy.
So let’s look at a scenario. A person finds out that they have cancer, and require some quite aggressive treatment. Due to this treatment, they are not able to work for a few months. As it is an illness, and not an injury, they are not covered by ACC.
If they have income protection insurance in place, they will start getting paid a monthly payment once their waiting period has been completed. This provides the family with at least a partial replacement of income while the person is under-taking treatment and getting ready to go back to work. Imagine the stress that would take off the family and the patient.
But say at the end of the treatment, the news isn’t good, and they are advised by their doctor that they are likely to have less than 12 months to live. They still can’t work, and so their income protection payments are continuing to be made.
However, at this stage they can claim under their trauma cover, and get a lump sum payment paid out to them. This payment gives the person and their family some options that they wouldn’t otherwise have. For example, they may wish to fund some other treatment options, or fulfill their bucket list, or pay off the mortgage to relieve some of the burden on the family.
Hopefully this helps explains the differences. And while it’s not a scenario that any of us would want to happen, having the right covers in place can help ease the strain on the family during what will be an incredibly tough time.