Protection for children

Bumps, bruises, coughs and colds are a normal part of growing up. But, while these health worries can be sorted relatively easily, the insurance industry is keen to help parents worried about the financial implications of more serious childhood health problems.

The most common form of cover for children is included on critical illness insurance. Most policies automatically include a payout if a child contracts any of the serious conditions listed including cancer, kidney failure and meningitis. For example, according to Defaqto, of the 37 plans it has listed on its database, only six do not include children’s cover, of which half are plans from friendly societies.

Bonnie Burns, product and technical director of individual protection at Legal & General, says providing benefit for children resonates well with parents. “Having a family is a common trigger for taking out protection so this benefit has a lot of appeal,” she says. “It is enough of a strain if a child is ill but a critical illness payout can take care of some of the financial worries. There can be additional travel and accommodation expenses and a parent may wish to take unpaid leave to look after their son or daughter.”

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Just how useful a benefit it is can be seen in the claims statistics. Although claims are dominated by cancer and heart attacks, insurers often report claims for children’s cover among the top five. For instance, between 1996 and 2012, Scottish Provident paid out almost £11m across 569 children’s critical illness claims, which – although only 1 per cent of total claims – made it the fifth most common pay out.

Cover limits

Child cover applies to adopted children and, with some insurers, stepchildren, as well as natural children and will automatically extend to new additions as and when they arrive without any need for underwriting. Age limits for cover vary; most insurers commence cover once the child is 30 days old and stop it when they reach 18, or 21 if they are in full-time education.

As it is an additional benefit that does not affect the parent’s cover, there is a limit on the benefit available. Most providers will pay a maximum of 50 per cent of the parent’s sum assured, subject to a cap of £20,000 or £25,000.

Some insurers do pay higher amounts. For example PruProtect automatically includes £25,000 of children’s cover for free on its protection products but gives parents the option to add up to a further £100,000 if required.

The low probability of claims means that extending cover in this way is not expensive. Like their parents, prices for children are based on age and sum assured but as examples, for £100,000 of extra cover PruProtect charges an additional £8.62 a month for a one-year-old, £7.54 a month for a 10-year-old and £6.57 a month for a 16-year-old.

Additionally, while insurers have toyed with cut-down lists of conditions to trigger a child’s claim, it is now standard to cover them for exactly the same conditions as their parents. Ben Heffer, insight analyst for life and protection at Defaqto, says this is a positive step. “There are conditions such as dementia that are never going to affect a child but having one list is good in terms of clarity,” he says.