ProtectionJul 26 2013

Protection for children

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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