Is there a chink in my armour?

IF you have income protection insurance and private health cover you may think you are in a strong financial position to face a serious illness. The truth is quite different.

Consider the case of Kathy, a 41 year-old self-employed marketing consultant, married with one young son. She was healthy, active, and with death cover, income protection and private health insurance in place, she thought she was well protected against any eventuality.

Kathy knew the missing piece in her protection portfolio was trauma insurance. But with income protection and private health cover in place, she wondered did she really need it?

It turns out she did.

In November 2009, Kathy was diagnosed with breast cancer. Two rounds of surgery followed, then chemotherapy and radiotherapy, and then the reconstruction surgeries.

Kathy wasn’t just a few hundred dollars out of pocket, or even a few thousand. After Medicare and the health fund had paid their parts, the gap costs came to tens of thousands of dollars.

‘For example, my out of pocket costs for radiotherapy were about $2,000 after Medicare and my health insurance had kicked in. The out of pocket cost I was quoted for reconstruction surgery was $10,000. And to pay for a year of Herceptin – a drug that has been shown to reduce the chance of breast cancer coming back by 52% compared with chemotherapy alone – I would have had to pay something like $80,000’, said Kathy.

‘That’s nearly $100,000 in out of pocket costs. Of course when your life is at stake you naturally don’t question the cost, you spend whatever it takes, provided you have the money in the first place.’

Kathy says that she would love to spend more time with her children and to scale back her work, but the reality is that she just can’t afford to.

‘If I’d had trauma insurance when I was diagnosed, it would have given our family that financial cushion to allow me to work less. To have a lump sum payout in the bank would get rid of that everyday financial stress, and the one thing you really need to do once you’ve been seriously ill is to avoid stress.’

 But what about income protection?

‘I wouldn’t dream of being without income protection cover, but the reality is that in my circumstances it didn’t really help this time. My policy would only pay out after two weeks of not working, and even though I had several bouts of surgery and chemo, I tolerated the treatments relatively well, and I was only in bed for about a week each time. I wasn’t actually away from work for long enough to qualify for a benefit.’

Ironically, Kathy’s financial adviser had previously encouraged her to take out trauma cover.

‘I really hope that I can stop other people making the same mistake by telling my story. If you don’t have a large amount of cash set aside to cope with something like a serious illness, don’t put it off. Just talk to your adviser straight away.’

Trauma cover

Trauma cover is designed to pay a lump sum in the event that you suffer one of the pre-defined traumatic events, which generally include cancer, heart attack, bypass surgery or stroke, plus many other conditions. This lump sum can help you meet the many out of pocket costs you can be faced with in the event you suffer a traumatic condition and – by reducing the financial and emotional stress you may otherwise face – can ultimately improve your recovery.

For information on trauma insurance, contact your financial adviser.