Trauma insurance (critical illness cover)
Trauma insurance pays a lump sum if you are diagnosed with a serious illness or suffer a serious injury listed in the policy, such as cancer, a heart attack, a stroke or a major head injury. It is also called critical illness or recovery insurance.
Unlike TPD or income protection, it pays on the diagnosis or event itself. You don't need to stop working or show you can never work again. That makes it the cover that pays for treatment, time off and recovery when you are likely to get better but need money while you do.
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General advice only. It doesn't consider your circumstances. Read the PDS and TMD before you decide.
Free tools
- Trauma insurance calculator: Treatment, recovery and time off work, less what you already have, beside life and TPD cover.
What trauma insurance covers
Each policy lists the conditions it covers and defines each one medically. Moneysmart's examples are cancer, heart conditions, major head injury and stroke. It also warns that trauma cover does not cover mental health conditions, and that definitions differ between insurers, so the same diagnosis might meet one policy's definition and not another's.
Two conditions commonly sit on top of the diagnosis. A survival period means you must survive for a set time after the event before the benefit is payable; one insurer's 2026 TMD uses 14 days. A qualifying period means some conditions aren't covered if they first appear soon after the cover starts; the same document applies 90 days to some trauma events. Check both before comparing prices.
Moneysmart lists what people use the money for: out-of-pocket medical costs, living expenses while you or your partner can't work, therapy, nursing care and special transport, changes to your home, and paying down debt such as the mortgage.
Common conditions and what to check in each definition
Moneysmart says what's covered and the medical definitions can differ between insurers, so focus on how each policy defines the conditions that matter most to you. These are the questions to take to each PDS.
Definitions don't stand still. Insurers that follow the Life Insurance Code of Practice commit to reviewing all medical definitions on policies sold to new customers at least every 3 years with help from medical specialists, and to updating any that rely on an obsolete method of diagnosis or treatment. If your policy names a method no longer used in mainstream Australian medicine, they commit to assessing your claim with a current one.
| Condition | What to check |
|---|---|
| Cancer | Which cancers are covered in full, which early-stage cancers pay part of the benefit or nothing, and any qualifying period after the cover starts |
| Heart attack | The medical tests and thresholds the definition requires, and whether a less severe heart attack pays a partial benefit |
| Stroke | Whether the definition needs lasting neurological impairment, and how a transient attack is treated |
| Coronary artery bypass | Which procedures count, and whether a less invasive procedure such as angioplasty pays a partial benefit |
| Every condition | The survival period (one insurer's 2026 TMD uses 14 days) and any qualifying period after cover starts (the same TMD applies 90 days to some events) |
Trauma insurance vs TPD (and income protection)
People mix these three up because they can overlap after a serious illness. The difference is what triggers the payment and how it is paid.
| Cover | Pays when | How it pays | Must you stop working? | Can it be held in super? |
|---|---|---|---|---|
| Trauma | You're diagnosed with a listed condition or suffer a listed injury | Lump sum | No | No new cover since July 2014 |
| TPD | You're unlikely ever to work again, as defined | Lump sum | Yes, permanently | Yes (any-occupation definition) |
| Income protection | Illness or injury stops you working, after a waiting period | Monthly payments for the benefit period | Yes, fully or partly | Yes |
| Life cover | You die, or are diagnosed with a terminal illness | Lump sum | Not applicable | Yes |
Why you can't hold trauma cover in super
Super funds stopped offering new trauma cover in July 2014. From then, trustees can only provide insurance that matches a condition of release (death, terminal medical condition, permanent incapacity or temporary incapacity), and a trauma diagnosis on its own isn't one of them. If you joined a fund that offered trauma before July 2014, you may still have it; your member statement will show it. Otherwise, trauma is bought outside super, directly or through an adviser, and paid from your own pocket.
Partial payments, reinstatement and linked cover
Some policies pay a partial benefit for less severe conditions, such as some early-stage cancers, and the full benefit for more severe ones. How many conditions pay in full, and how many pay only in part, is one of the biggest differences between policies.
A reinstatement option lets you restore your trauma cover after a claim, usually after a set period, so you are still covered if something else happens. It costs extra and isn't in every policy.
Trauma can be bought on its own or packaged with life and TPD cover. If it is packaged with life cover, Moneysmart notes your life cover may be reduced by whatever the trauma claim paid.
How much trauma cover can you apply for?
Each insurer sets its own maximum sum insured for trauma in the PDS, and underwriting can limit it further: one insurer's 2026 TMD lists a limit on the sum insured among the possible outcomes of its health and financial questions, alongside a higher price or special terms. Entry ages are narrower than for life cover too. The same TMD takes trauma applicants aged 18 to 59, against 16 to 74 for life cover. Moneysmart's checklist for comparing trauma policies includes the limits on cover, so ask each insurer for its maximum before you settle on an amount.
How much trauma cover to consider
Moneysmart suggests thinking about how much income you and your family would need if you couldn't work for some time, what income protection or TPD you already hold, what private health insurance would pay, and what help family and friends could give. Trauma is usually sized to cover a period of treatment and recovery plus the costs health insurance won't: specialist gaps, travel, care at home and the income a partner gives up to help. It is rarely sized to replace income for years; that is income protection's job. Our trauma insurance calculator adds up treatment, recovery and time off work, less what you already have.
Making a trauma claim
Contact the insurer or your adviser once you've been diagnosed, or your super fund if you still hold trauma cover taken out there before July 2014. Moneysmart says insurers ask for medical reports and test results, may ask to contact your doctors, and may send you to an independent medical examination. Check the survival period first: the benefit is payable only once you've survived for the period the policy sets after the event.
Insurers that follow the Life Code commit to deciding a lump sum claim within 6 months of receiving it, or of the end of any waiting period if that's later, and to updating you at least every 20 business days if circumstances beyond their control delay it. If you urgently need the money, ask whether the insurer can prioritise your claim or advance part of the payment. APRA's figures for the 12 months to 31 December 2025 show insurers admitted 87.6% of finalised trauma claims on advised policies and 83.8% on policies bought direct, and took an estimated 1.4 months on average to decide.
If the claim is declined, a Life Code insurer commits to giving you its reasons in writing and, where a pre-existing condition is the reason, explaining the medical connection to your claim. Ask for a review, then complain to the Australian Financial Complaints Authority (AFCA) if you still disagree.
Tax on trauma insurance
The ATO lists trauma and critical care insurance premiums as not tax deductible, because the policy pays a capital sum rather than replacing income. On the other side, a trauma lump sum paid to you as the person insured is generally not taxed as income. Check with a tax agent if the policy is owned by someone else, such as a business. TPD held in super is different: a TPD payout from super is taxed as a super benefit if you're under 60, and the TPD payout calculator shows what you'd receive after tax.
General advice only. This information doesn't take into account your objectives, financial situation or needs. Consider whether the product is right for you and read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you decide. We don't compare every product in the market, and we may earn a commission if you take up a product through our links.
What to watch for
- Compare the medical definitions of the conditions most relevant to your family history, not the length of the conditions list.
- Check the survival period and any qualifying period for cancer and heart conditions.
- If trauma is linked to life cover, find out how much life cover you would have left after a trauma claim.
- Mental health conditions are not covered by trauma insurance. Income protection is the cover that responds to them, subject to its own terms.
Common questions
Is it worth having trauma insurance?
It can be, if a serious illness would leave a gap between what your savings, sick leave and health insurance cover and what treatment and recovery really cost. It is a lump sum on diagnosis, so it helps even when you expect to return to work. If you already hold strong income protection and savings, the gap may be small.
What is covered in trauma insurance?
Trauma insurance covers the specific illnesses and injuries listed in the policy, commonly including cancer, heart attack, stroke and major head injury, each with its own medical definition. Mental health conditions are not covered.
Is trauma insurance the same as TPD?
No. Trauma pays a lump sum when you are diagnosed with a listed condition, whether or not you can work. TPD pays only if you are unlikely ever to work again as the policy defines it.
Can I claim trauma insurance on tax?
No. The ATO says trauma and critical care insurance premiums are not deductible. A trauma payout to the person insured is generally not assessable income.
Do I need to declare a trauma or life insurance payout on my tax return?
Generally no, if you're the person insured or a relative. A trauma or life insurance lump sum is capital, not income, and the ATO lists compensation for an injury or illness you or your relatives suffered, and some payouts under a life insurance policy, among the amounts exempt from capital gains tax. It can be different if the policy is held through super, where the payout is a super benefit with its own tax rules, or owned by someone else, such as a business. Income protection payments, by contrast, must be declared.
Can I get trauma insurance through my super?
Not new cover. Super funds stopped offering trauma insurance in July 2014 because it doesn't match a condition of release. Cover taken out before then may continue, so check your member statement.
General information only
Medical definitions in trauma policies are specific and change between product versions. Read the PDS for the definitions that apply to you, and speak to a licensed financial adviser if you want a recommendation.
Protecting your income as well
Life, TPD and trauma cover pay lump sums. Income protection is the cover that pays a monthly income while you recover.