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.”
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.
Some insurers will substitute certain conditions. For example, Friends Life does not pay for terminal illness and type 1 insulin-dependent diabetes but it adds in cover for child’s hydrocephalus and an intensive care stay of at least seven consecutive days.
Carer benefit
While child cover is commonplace on critical illness, only a handful of the income protection providers have recognised that a sick child can put significant pressure on the family finances. According to Defaqto, Ageas, Friends Life and LV= include a carer’s benefit on their plans that will kick in if a child is diagnosed with a serious condition.
For example, on Friends Life’s policy the child carer benefit will pay the lower of the annual benefit or £25,000 on diagnosis of any one of 31 serious conditions such as cancer, benign brain tumour and bacterial meningitis.
Although insurers have included some children’s benefit on critical illness and income protection, it is not possible to take out life assurance for a child. Under the Prevention of Cruelty to, and Protection of, Children Act 1889, it is illegal to have an insurable interest in a child, making life assurance off limits.
The exception to this is a friendly society tax-exempt savings policy. Although predominantly a savings policy, allowing a maximum investment of £25 a month or £270 a year, these plans do include a small element of life assurance.
The level of cover varies but, as an example, Family Investments includes life assurance calculated at 75 per cent of payments expected during the initial term. Therefore, for a £25 a month investment over 10 years, the life cover would be £2,250.
Hospital bills
Medical insurers also recognise that there is a market for children. Although these products are designed to cover elective surgery – which is less common among children – and the NHS provides a good level of paediatric care, medical insurance can give parents the peace of mind that they could access private treatment if necessary. This may be useful where there is a long waiting list or they would like to seek a second opinion or receive a course of treatment not readily available on the NHS.
Where a parent already has cover, Mike Blake, compliance director at the PMI Health Group, says that the easiest option is to add the child to their policy. “If a parent has corporate cover, extending this to include the kids can be particularly cost-effective. Insurers charge 50 per cent of the adult rate to add the children, regardless of how many there are in a family.”
Where a parent doesn’t have their own policy but would like to provide cover for their children, a few insurers market products especially for kids. These include Axa PPP healthcare, which has a plan called First Healthcare at £12.99 a month for children up to age 18. This covers the standard range of diagnostic tests, in-patient and out-patient treatment, radiotherapy and chemotherapy and includes provision for a parent to stay in hospital with their child.
For slightly older children, WPA offers a stand-alone policy, XS Health, which would cost an 18-year-old £7.59 a month. This provides comprehensive cover but imposes a rolling excess of £1,500 a year and an annual claim limit of £150,000 so is designed to help with the more significant costs.
Another option to provide some financial assistance with a child’s healthcare costs is a cash plan covering everyday expenditure such as dental, optical and physiotherapy. Although children are entitled to free NHS dental treatment, sight tests and optical vouchers, Mr Blake says a switched-on policyholder can easily claim back more than the annual premium.
Some policies, such as Westfield’s Good4You plan, will automatically include children, with the annual benefit either applying to each child or shared between them, while others will require an additional premium to extend cover.
Whether covering a child’s medical bills or a more serious illness, as these benefits can be purchased at little or, in the case of children’s cover on CI no cost, it is worth pointing them out to parents who are arranging their own cover.
This helps to highlight the value of these products as well as providing peace of mind that the whole family is protected.
