Heart disease and stroke continue to be the two most common causes of death⁵ in Australia for people over the age of 45 and accounted for over 30,000 Australian fatalities in 2012. Incredibly, thousands of Australians are underinsured or have no insurance in place to cover the expenses should they suffer a debilitating illness.

According to the Cost of Cancer in NSW ⁶report, the total expected lifetime economic cost of cancer – taking into account both the financial cost and the burden of disease (lost productivity, burden on healthcare system) – is almost $1m per person. Certainly for an individual being treated for cancer, out of pocket costs in excess of $100,000 are not uncommon. Many financial planners use a rule of thumb for calculating an appropriate sum insured which at minimum should allow for the removal of debt and the provision of one year’s income, but this is merely a starting point.

These initial figures should be considered along with the financial cost to the individual and family, and importantly the ‘true cost’ of the disease. 

You can rely on trauma insurance

Trauma insurance can cover between 10 to 50 medical events and will pay in the event you suffer a defined health trauma, regardless of your work status. It pays a lump sum to help cope and recover from serious health conditions such as cancer, strokes and heart attacks. Some insurers also offer partial payments for less serious conditions.

Medical advances have meant that our chances of surviving traumatic events are much better than in the past. However, the cost of treatment can sometimes be beyond your normal means. Without trauma cover, you may need to dip into your children’s education fund or your retirement savings; or you might even have to increase your mortgage to pay for expensive treatment.

The difference to income protection

Importantly, a trauma payment is not dependent on you being unfit to work (unlike income protection, where you need a doctor to certify your ongoing health). The diagnosis of a traumatic condition might mean that you physically could go to work, but would prefer to spend time with your family and reduce any work-related stress while you recover and consider how your future will be affected.

To make sure you don’t increase the statistics, check your policy documents to see which level of cover you hold, and speak to your financial planner if you are unsure. They can help you determine what cover you already have, what changes or additions may be appropriate and how to make them.

Speak to your Leenane Templeton Financial Planner to discuss your insurance options. Contact us at 02 4926 2300 or email success@leenanetempleton.com.au.

Source: Zurich

⁵ Leading Causes of Death, Australian Institute of Health and Welfare, www.aihw.gov.au/deaths/leading-causes-of-death.

⁶ Cost of Cancer in NSW, Access Economics Pty Limited for The Cancer Council NSW, 2007.

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Although a health crisis can occur at any time of life, the risks obviously increase as we age which is why insurance is important at any age. Unfortunately, due to the increased risk of illness or injury the cost of insurance for those over 50 can be high. As a result, people in this age group often drop their insurance cover altogether just when their need is at its greatest.

If age 50 is looming, or you’ve already passed your half century, it’s even more important to protect both your income-earning ability and the financial security of your dependents. This can be achieved with appropriate insurance.

Here are some solutions to consider:

• Life and disability insurance can be arranged through most superannuation funds. Premiums are paid from the superannuation thereby reducing strain on the household budget.
• Review your level of insurance. As your investments and superannuation increase, or your debts and expenses decrease you may be able to reduce your cover and still provide for your beneficiaries.
• For income protection insurance, if you have savings in place, annual leave or sick leave entitlements, you may consider increasing the waiting period before a claim. Depending on circumstances, this may allow you to retain an important benefit at a more affordable price. More-over, while Income Protection cover targets insuring 75% of your Gross Wages, your annual cashflow needs to cover living costs may be lower than this. You may consider reducing the monthly benefit in line with your cashflow needs thereby reducing the cost of cover.

If you’re not sure what to do, talk to one of our licensed financial adviser here at Leenane Templeton before you make any adjustments to your insurance cover. It may not cost you as much as you first thought.

Call (02) 4926 2300 or email us.

To discuss how insurance is important at any age please call our specialised financial and risk management advisors to discuss your circumstances further.

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Dr Barnard saw a need for financial assistance for patients who suffered a significant illness or accident.  “When I went into private practice I could not help but notice that while many patients eventually fully recovered medically, they suffered severe financial problems. This was not because of the cost of the operation but because of the disruption to their lives and their loss of income,” Dr Barnard said.
 

Trauma insurance can fill this gap. Where total and permanent disablement (TPD) requires you to be unlikely to work again, and income protection pays if you are unable to work either temporarily or permanently, trauma payments require you to meet the definition of one of a list of specified diseases and injuries.  So it’s not about the level or length of the disability; rather, it’s based on the diagnosis.
 

You may have heard trauma insurance referred to by another name, such as living, critical illness or crisis recovery. Trauma insurance can be complicated, with different policies covering different conditions, each with specific definitions. 
 

Initially, just a handful of conditions were covered: cancer, heart attack, stroke and coronary artery surgery.  This list has expanded and some policies cover up to 40 conditions including degenerative diseases like multiple sclerosis and Parkinson’s disease, paralysis, comas, loss of speech, deafness, chronic organ failure, major organ transplants, occupationally acquired HIV and even severe rheumatoid arthritis.
 

Because trauma insurance provides a payment based on diagnosis, rather than the level of impairment, working out the right sum insured is complicated. Consider that for cancer, a claim may be for a melanoma or may be for stage 3 lung cancer. Trauma provides you with a one-off lump sum so income and capital requirements need to be considered. Deciding the right amount of cover for you will involve a detailed discussion with your adviser around two key areas:
a) What will you need at the time of your illness/injury
b) What do you want your life to look like afterwards.
 

Income needs
 

Firstly, your adviser may consider your income needs. As income protection only covers you for 75% of your income, many advisers will recommend that you top this up to 100% with trauma. The period you allow for is up to you, although a general rule of thumb is to allow at least two years.
 

You may also consider the other income in your household. If you were undergoing treatment for cancer, or diagnosed with motor neuron disease, would you need and/or prefer for your partner to take some time out of the workforce to look after you and your family?
 

Having this option to step out of the workforce to concentrate on your recovery can make an enormous difference.
 

Medical costs
 

Secondly, you and your adviser may consider the cost to have access to the best medical care available. You should consider the cost of treatment, potential travel and accommodation along with ongoing therapy. It can be difficult to quantify how much could be required. The cost of treatment and loss of productivity from cancer has been estimated at hundreds of thousands of dollars in a report for the Cancer Council of NSW.
 

When looking at medical costs, it isn’t just about treatment costs. Having access to quality rehabilitation services will assist your recovery. Whether this be physiotherapy, wellness services, counseling or alternative medicine, your plan needs to include an amount to fund your recovery. 
 

Moving forward
 

Finally, it’s important to contemplate what changes you may like to make to your life.  Will you still have the same drive to return to work? Your priorities could change, and planning for this can give you the ability to reduce your hours or cease work entirely. If you’re working towards retirement, you may wish to bring this date forward. Your adviser can discuss with you how these objectives can be achieved, such as through replacing income or reducing debt, so that less income is required.
 

While trauma is not well known, you are more likely to claim on this cover than life or TPD insurance.  Spending time with your adviser to talk through your personal situation and plan for your individual needs is an important step in making sure you have the right level of cover in place.
 

Case Study
 

Eleanor is a 44-year-old anaesthetist.  She is married to Matt, an engineer, and they have two children aged eight and six. 
 

She discussed with her adviser how difficult it was to consider what she would do if diagnosed with a serious disease or injury, but there were a number of scenarios she was sure of. Eleanor knew that if she had to go through treatment for cancer, she wanted Matt to be able to care for her and the children. She also said if she was diagnosed with a degenerative disease like multiple sclerosis, she would want to change her priorities, step away from work and focus on her well-being.
 

With her adviser, they put together a sum insured that would cover 25% of her income for two years (her income protection policy will provide the other 75% if she is off work). They also calculated lump sum for medical care and enough to pay off their mortgage. While paying off the mortgage was not a specified need, the ability to do this would allow either Matt or Eleanor to cease working. While the future is uncertain, talking through and understanding their protection plan has given Eleanor and Matt confidence that they’ve prepared for the unexpected.
 

For more information on trauma and risk insurance, contact your our specialist advisors here at Leenane Templeton.
 

Source: BT
1. Cost of Cancer in NSW by Access Economics http://www.cancercouncil.com.au/wp-content/uploads/2010/11/costofcancer_summary.pdf
 

Disclaimer
 

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Thanks to modern day treatments, cancer survival rates are on the rise. But can you afford to be treated?

This article will help you understand the importance of trauma cover when facing serious illness.

One in two Australians will develop cancer before the age of 85 and one in five will die from the disease, according to a report from the Australian Institute of Health and Welfare (AIHW).

But while the incidence of all cancers rose by 27 per cent in the 25 years to 2007, deaths from the disease have actually fallen by 16 per cent. This proves just how far modern medicine has come and the calibre of treatments available to treat the various forms of this illness.

In fact, this report has revealed that cancer patients are increasingly living longer with 66 per cent now surviving for at least five years (for all cancers combined in the period 2006-2010) – a large increase from the 47 per cent survival rate for all cancers in the period 1982-1987.

According to Anne Bech, spokeswoman for AIHW, “While overall cancer survival is improving in Australia variations still exist between types of cancer.”

The cancers with the largest so-called survival gains from 1982-1987 to 2006-2010 were prostate and kidney cancer and non-Hodgkin lymphoma. Survival rates for lip, larynx and brain cancer along with chronic lymphocytic leukaemia didn’t improve. Between 2006 and 2010 the cancers with the highest survival rates were testicular, prostate and thyroid cancer, along with melanoma of the skin. All had a five-year survival rate of 90 per cent or more.

Sadly pancreatic cancer and mesothelioma remain incredibly lethal and have the lowest survival rate, with less than ten per cent of patients surviving five years following diagnosis.

The report also revealed that cancer sufferers, who have survived for five years, had a 90 per cent chance of living for another five years for all cancers combined. This is all good news right? Well, if you have enough money to cover all the necessary (and ongoing) treatments then absolutely! But, what if you can’t afford to be treated?

One might be forgiven for thinking that a combination of income protection insurance, private health insurance and Medicare are enough to cover the treatment of serious illness. But the truth is, in the case of cancer, where it can take years of treatment including many rounds of chemotherapy, radiotherapy and even surgery, serious illness can come at a huge cost which can mean hundreds of thousands of dollars out of your pocket.

Take Kathy for example…

Kathy, aged 41 and with two sons, was diagnosed with breast cancer. She had two rounds of surgery, chemotherapy and radiotherapy, not to mention the reconstructive surgeries on top of that. After Medicare and the health fund had paid their parts, the gap costs came to tens of thousands of dollars.

Read on to find out why she wished she had listened to her planner’s recommendation to take out trauma cover sooner.

It’s important to speak with your planner to understand the difference a lump sum payment can make in the event of suffering a pre-defined traumatic event such as cancer.

Not only will trauma cover help to meet any out of pocket expense you might face, but it could help you on the road to recovery by removing some of the added financial pressure created by the need for ongoing and often expensive treatments.

Consider the incremental increase in survival rates for all cancers combined:
■ 1982-1987 – 47%
■ 1988-1993 – 52%
■ 1994-1999 – 58%
■ 2000-2005 – 62%

Are you financially prepared for the treatments that go along with surviving serious illness?

For more information on trauma cover to put your mind at ease, contact our office and speak to our specialised risk management team.

Source: Zurich, November 2013

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