At first glance, Income Protection and Trauma Insurance may look very similar. After all, both are designed to protect you financially if you’re sick of injured. But if you get past that first impression, you will realise that they provide very different types of cover.

So, which works best for you? To answer this question, let’s dig deeper into the differences.

What’s Income Protection Insurance?

Income Protection offers you a monthly replacement income if you become disabled or severely ill. The amount of these monthly payments is tied to what you earn, and can only be collected when you’re not able to work. Plus, you can tailor this type of cover to your needs by selecting the right ‘benefit amount’, ‘wait period’ and ‘benefit period’.

Benefit amount — The Income Protection payments usually amount to a maximum of 75% of your original earnings. But if you have lower day-to-day expenses, or simply want to reduce the premium, you can opt for a lower percentage.

Wait period — Another way to bring down costs is to choose a longer ‘wait period’ (if appropriate to your circumstances). This is the amount of time that you can afford to wait before you receive your first monthly payment – and of course, the longer the ‘wait period’ you choose, the lower the premium will be.
The choice strictly depends on your situation: do you have a ‘rainy day’ fund? How long could you afford to wait, without earning an income?

Benefit period — You can specify a ‘benefit period’ in your policy, which is the maximum period of time that your insurance provider will pay you while on claim. While some people choose to only receive Income Protection payments for two to five years, you can also opt to receive them until you reach retirement age at 65.

What’s Trauma Insurance?

With Trauma Insurance, there’s no waiting period involved. This type of cover is paid upon diagnosis or severe critical condition, and offers a lump sum regardless of whether or not you’re unable to work. For example, it can help you take care of expenses that health insurance doesn’t cover (rehabilitation, carers, extra treatments, etc.).

About the meaning of ‘critical condition’ — Usually they represent serious, life-threatening illnesses such as stroke, heart attack and malignant cancer, but the list of covered conditions can vary significantly between different policies. That’s why it’s so important to understand what your policy entails, and which conditions are covered.

Stand-alone or ‘Accelerated’ — You can either select a Stand-alone Trauma Cover or attach it to your Life Insurance (‘Accelerated Trauma Cover’). While this is usually cheaper than the Stand-Alone Trauma Cover, keep in mind that your Trauma Insurance claim will reduce the payout of your Life Insurance.


If you’d like to discuss Insurance that can help you when you can’t help yourself, feel free to contact us. Getting the right cover is all about understanding the finer details, and the right Insurance adviser is here to make sure that you get the right policy.

An Adviser Disclosure Statement is available free and upon request.