When ill health strikes – the financial fallout
A serious illness or injury can do more than disrupt your health, it can turn into a financial crisis for you and your family. While our public healthcare system provides an important safety net, it does not remove the wider financial pressure that can come with time away from work, ongoing treatment, or a permanent change in health.
This is where many people underestimate their risk. It is easy to assume, ‘that won't happen to me’, but the truth is that illness, injury, disability, or a major medical event can affect anyone. Studies in 2023 indicate that 1 in every 2 Australians will be diagnosed with cancer by the age of 85. In 2022, musculoskeletal conditions, including back problems and pain, arthritis, and osteoporosis, affected 30% of all Australians.
If a person does not have adequate Income Protection, Death, Total and Permanent Disability (TPD), and Trauma cover, the financial impact to the individual and their family can be severe and long-lasting.
The reality of medical and non-medical costs
One of the most striking findings from research is that the cost of managing a serious illness often exceeds the cost of the medical treatment itself. While Medicare and private health insurance might cover hospital stays, they rarely cover other hidden costs.
Research, such as Zurich's Cost of Care (Volume 2) report, shows that many families face extra costs such as:
Consultation fees with medical specialists, including surgeons and physiotherapists
Take-home medicine needed for ongoing treatment
Home or vehicle modifications after a disability
Specialist equipment and rehabilitation support
Travel and transport costs for repeated appointments and treatment
Care needs, where a partner or family member may need to reduce work hours or stop working temporarily.
These costs can quickly add up, and without the right insurance cover in place, families may need to use savings, sell assets, or take on debt just to stay afloat.
Why income protection matters
For most Australians, their ability to earn an income is their most valuable asset. Income Protection is often overlooked, but it can be one of the most important forms of insurance when someone is unable to work for a period.
Without this cover, a person may receive only limited income from sick leave or Government support, which is often not enough to cover everyday bills.
Income Protection can replace up to 70% of gross income, helping keep the household running while the person recovers. This allows the focus to remain on health and rehabilitation, rather than on how to pay the bills.
The importance of TPD, Trauma and Death cover
While Income Protection supports the short- to medium-term, TPD, Trauma, and Death cover provide protection for more serious life events.
TPD insurance pays a lump sum if a person is unlikely to ever return to work due to illness or injury. This can be critical for clearing debt, making necessary home changes, and funding future care needs. It gives families breathing room at a time when life may change permanently.
Trauma cover can also be vital. It pays a lump sum if a person suffers a specified medical condition such as cancer, stroke, or heart attack. Trauma cover provides cash when it is needed most following a diagnosis, helping cover treatment costs, time off work, travel, and other immediate expenses. This gives the family flexibility to focus on treatment and recovery without the added stress of financial strain.
Death cover plays a similar role for dependants. If a breadwinner dies, the payout can help protect the family home, support children's education, and reduce financial pressure on the surviving spouse or partner.
Bridging the gap
The issue of underinsurance is not just a theoretical concern. It is a real risk that can turn a health crisis into a financial crisis. Having adequate insurance cover should account for both the direct medical costs and the much larger indirect costs of recovery and daily living.
A well-thought-out insurance plan means understanding the financial impact a health event could have on you and your family and having the right safeguards in place to manage that risk, ease the financial burden, and provide the support needed when it matters most.
It is worth noting that the cost and suitability of cover vary for each person. Policy terms, premiums, and exclusions should be discussed with a Financial Planner.
Book a confidential consultation with a Hood Sweeney Securities* Financial Planner today.
The information in this article contains general advice and is provided by Hood Sweeney Securities Pty Ltd AFSL 220897. This article has been prepared without taking your personal objectives, financial situation, or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation, and needs. Please refer to our FSG (available at https://www.hoodsweeney.com.au...) for contact information and information about remuneration and associations with product issuers
