This is usually called “Trauma Insurance”. “Critical Illness Insurance” is another one that some of the insurers use - It’s basically heart problems, heart attacks, stroke, and all sorts of varieties of cancers. But we've had clients who went down to their skin clinic, got a melanoma removed, met the conditions of a payout and we said, "Hey, have you checked your insurance policy there” and he rung up and ended up getting $40,000 paid out.
I guess the purpose of trauma is to pay for medical bills and those sorts of things that pop up - it's not just to have a win because you're sick, but it's often something that can be triggered easily by even a skin cancer.
Another example is my dad who had a claim when he had a heart problem - at the time, he ended up having an active policy with Suncorp and got six figures paid out to him, which was nice. He didn't need to use that because of our public health system, but he actually lost income as a business owner and didn't have income protection insurance, so it helped buffer that out.
Insurance is important. It can be very confusing, and you really need to understand what you're paying for. My tip would be to make sure your insurance is structured correctly. A lot of it can be structured so it's paid out of super as well (not all of it, but some of it) and it can also be tax deductible if it's structured certain ways.
So if you haven't had a review of your insurance recently, then I'd recommend you do that. We are not insurance advisers, but we recommend working with a financial planner or insurance adviser to walk you through these steps.