It is now 25 years since the first ‘trauma or critical illness’ policy was issued in South Africa. Marius Barnard, a member of the pioneering heart transplant team saw patients dying when he believed they should have recovered. 

A trauma policy pays out if you are diagnosed with a medical condition defined in the policy. All policies will cover the four most common diseases – cancer, stroke, heart attack and bypass surgery.  Insurer MLC says these events covered 91% of their trauma policy payouts in 2008. Modern policies will also cover many other conditions. 

With advances in medical techniques most people survive these events and go on to live normal lives.  No longer need a serious illness lead to a life of invalidity. Extra money once the critical period has passed can help the patient focus on recovery.

We are all faced with the risk that an illness or accident will interfere with our finances. According to major life office Asteron, more than one in three men will have a serious accident or illness before age 70. More than one in every five women will experience a similar event.

A trauma policy payout is tax free and can be used for any purpose. For instance, it could be used to pay medical bills, get ahead of mortgage repayments, replace lost income or even take a holiday to recuperate.

Your adviser can explain how a trauma policy can fit into your risk management plan.

January 2009