Sorry it's not that traumatic enough

New Zealanders are discovering the hard way that just because something is traumatic, it does not mean their trauma insurance policies will pay out.

Trauma insurance is a type of cover that pays a lump sum when someone is diagnosed with a severe illness or suffers a serious accident. Each policy will have a different range of conditions it covers but it is usual for things such as heart attacks, serious cancer, stroke, injuries resulting in paralysis or blindness and burns to be included. It is often sold as ideal protection for customers who need to cover extra costs if they become seriously ill.

But Insurance and Financial Services Ombudsman Karen Stevens said it was causing confusion. She said many people did not understand that a trauma policy would only pay out for the conditions stated in the policy wording.

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