Pros and cons of children's cover

This article is part of
Guide to family protection

Phil Nash, product development manager for ActiveQuote, comments: “This could prove to be insufficient to cover medical costs for serious conditions.”

Moreover, if a parent has left work to become the primary care giver, while a policy will help both the parent and the patient financially, it might not be enough to cover the potential shortfall in income. 

Therefore, where they can afford it, and it seems reasonable to do so – perhaps because of family history – it might be worth buying additional protection or considering private medical insurance policies specifically for children.

Rob Harvey, independent protection specialist for Drewberry Insurance, states: “The most comprehensive approach is likely to include elements of PMI, income protection and CIC, which means children’s cover is ultimately an exercise in identifying the ‘core’ risks that clients are concerned with covering, and then building the most complete plan from the premiums they can afford.”

What it covers – and does not cover

It is also worth noting the terms and conditions of the cover as many pre-existing conditions cannot be covered or claimed for. 

Mr Timpson explains: “Children’s cover will exclude any pre-existing health conditions the child has been diagnosed with before the parent has taken out cover.”

This might apply where pre-natal screening has indicated a chromosome defect or the potential for Down’s syndrome, so it is worth checking whether a policy that covers Down’s syndrome will still pay out if there was a pre-natal indication the child might have such a condition.

Mr Harvey adds: “Because there is no ‘immediate insurable interest’ with children, the level of benefits available are, in reality, unlikely to be of a useful size.

“The fact is, a regular income will probably be far more useful than a small lump sum in the event of a serious problem with a child’s health.”

Therefore it is worth the parents and advisers making sure they have provided full disclosure before taking out insurance, to avoid the possibility of having a claim declined. 

Moreover, as Garry Webb, head of compliance for financial advisory firm Roxburgh Financial Management, comments, cover is restricted to “life-changing conditions”. 

As such, he would like to see more innovation in the market. He explains: “Clients take income protection primarily against what they see as more likely reasons to be off work, such as short-term illness and accident.

“At present there is no specific plan that provides similar cover if their child were in this position and they had to take unpaid leave to look after the child. 

“This would be a major move forward in family cover.”

Then there’s the fact automatic cover means some people might be paying for something they will never be able to use.