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Preparing for the unexpected: The importance of Critical Illness Insurance

For many people, a critical illness event (or trauma event) may result in a temporary or even permanent inability to work. This loss of income can have a cascading effect on one’s lifestyle, from paying bills to supporting one’s family both physically and financially. Critical illness, whether it is caused by accidents, illnesses, or other unforeseen circumstances, can disrupt lives in ways never have imagined. Critical illness insurance (trauma insurance) is a type of life insurance cover that offers a financial benefit if the condition and severity are covered by the policy. If a benefit is payable, it may provide the ability to cover day to day living expenses, allow the insured to seek medical care and options related to their illness, and support the insured’s family’s quality of life during the insured’s treatment. This financial 'cushion' may provide the ability to focus on recovery without worrying about the financial impact of the illness or injury.

4-minute read

What you'll learn

Benefits of having critical illness insurance (trauma insurance) in place

A critical illness benefit is versatile. It provides the flexibility of using the funds as one wishes, whether it is to help with medical treatment, rehabilitation, mortgage payments or other expenses. Without adequate insurance coverage, these financial burdens can quickly drain a person’s savings. Critical illness covers specified serious events such as a heart attack, cancer, or stroke, although this is not an exhaustive list.

Having critical illness insurance (trauma insurance) may be a prudent and responsible choice, depending on the circumstances. It provides the financial security and peace of mind to navigate recovery. Having a critical illness insurance policy in place may provide the ability to financially support the costs involved in treatment and recovery when life takes an unexpected turn. There may also be additional benefits and options which can be added to a critical illness insurance policy at an additional cost. These key features may include, but are not limited to (and will vary between insurers and different policies):

  • Inflation protection – an option to increase the sum insured amount each year to allow for inflation.
  • Premium Freeze – an option to freeze the premium with a decreasing sum insured amount.
  • Guaranteed future insurability – an option to increase cover without underwriting based on a specified life event – such as having a baby.
  • Grief support – a service to help customers and their families and,
  • Financial planning – may provide a payment to help customers and their families work with a financial planner.

Critical illness insurance can generally be held under a stand-alone policy or as cover linked with a life insurance policy or total and permanent disability policy. Linked policies may allow total premiums to be lower than if each type of insurance is held as a stand-alone policy. This is because for linked policies, generally, an amount paid on one policy (e.g. critical illness) will reduce the cover amount on the linked policy (say for death).  For stand-alone policies, a claim on one policy (e.g. critical illness) does not impact the cover amount on the other policy (e.g. death cover).

Child's critical illness insurance is also a life insurance option available by most insurance providers. Similarly, it provides a lump sum benefit payable if a child suffers a critical illness (or trauma) event meeting severity requirement. This may provide the financial peace of mind required if the insured’s child suffers a critical illness and the insured is unable to work. This gives the insured the ability to support their child through medical treatments and recovery without the need to juggle work. Limits generally apply to cover amounts. For further information contact the insurance provider or visit the TAL Website.

Illnesses and injuries not covered under a critical illness insurance or trauma insurance policy

When taking out any insurance cover it is important to understand the terms, conditions, and exclusions of each policy. The Product Disclosure Statement (PDS) is an important resource to find out more specific information about each type of cover. Common terms, conditions, and exclusions to consider include: 

A pre-existing condition

Pre-existing conditions are conditions the person insured had prior to taking out the policy. Critical illness policies may exclude cover for pre-existing conditions, so it is best to understand the terms of the policy.

Many critical illness policies will have a qualifying period for certain critical illness events, which means if the specified critical illness occurs after the policy is purchased but within the qualifying period, the policy will not cover that critical illness.

Excluded medical conditions

Not all critical illnesses are covered, and severity of illnesses are defined. These illnesses and definitions will vary between policies. For example, not all cancers are covered.

Bridging the gap in health insurance with critical illness cover or trauma insurance cover

While health insurance covers many medical expenses, it may not cover all the costs associated with a critical illness (or trauma event). There may be non- medical expenses that health insurance does not address. Critical illness cover may fill these gaps, helping with out-of-pocket expenses that can strain finances. 

When considering critical illness insurance (or trauma insurance), it is essential to carefully review policy terms and compare policies from different insurers to choose the right coverage. With the right policy in place, the insured can face the uncertainties of life with more confidence and resilience. 


To find out more about Critical Illness insurance – visit the TAL website. Information provided on the TAL website will be subject to TAL’s Privacy Statement and Privacy Policy, available on their website.

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Things to be aware of about life insurance

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Things you should know

Any financial product advice provided on this website is of a general nature only and does not take into account your personal circumstances. Westpac refers customers to TAL Life Limited ABN 70 050 109 450 AFSL 237848 (TAL Life), the issuer of life insurance policies. TAL Life is part of the TAL Dai-ichi Life Australia Pty Ltd ABN 97 150 070 483 group of companies (TAL). If you purchase a life insurance policy as a result of a referral from us, Westpac will receive a commission of 10% of your premiums (exclusive of GST) for the period you continue to hold a policy.

Before purchasing life insurance, you should read the Product Disclosure Statement (PDS) and the Target Market Determination (TMD) to help you decide if life insurance is appropriate to your objectives, circumstances and needs. You can obtain the PDS and TMD from TAL’s website or by calling TAL on 1300 345 620.

By accessing TAL’s website, you will enter a third-party site not owned by Westpac. Any personal information you provide to TAL's website will be collected, used, and disclosed in accordance with TAL's Privacy Statement and Privacy Policy, also available on their website. 

If you would like help deciding whether life insurance is right for you, we recommend speaking to a financial adviser.