How to get protection that covers child illnesses

Search engines may provide reams of information, but as with most financial matters, providing pure information does not help the general public.

While the results tell you there is such a thing and that it’s available in the UK, very few people will know how to drill down into the wealth of information available on the internet. 

Moreover, it is unrealistic to imagine a new parent, or parents-to-be, full of expectant joys, will take it upon themselves not only to think ‘what happens if my child gets cancer’ but also to search for a policy that will protect them and their children. 

Advisers therefore are best placed to start these discussions with their clients as part of generational financial planning, despite the sensitivity of the topic, and to help parents make sense of the myriad protection options open to them.

In particular, critical illness policies (CIC) have been increasingly important as a means of protecting the parent and the child. 

The scope of cover available to the child will, in most cases, almost match that being provided to the parent. Johnny Timpson

The Association of British Insurers has had a children's CI definition as a feature of its model definitions since 1999, to reflect its usefulness to families as a means of providing financial benefit during difficult times.

Phil Nash, product development manager for Active Quote, says: “Children’s CIC used to be an element of policies that advisers were less keen to discuss with clients, due to its sensitive nature. 

“However, we know children’s CIC is the fifth largest in terms of claims, so omitting this from a CIC recommendation would not be in the customers’ best interests.”

How does it work?

Generally, children’s cover is automatically embedded within a plan taken out by the parents – whether a critical illness or life assurance policy. 

Deepak Jobanputra, deputy chief executive of VitalityLife, says: “Most modern critical illness policies include a small amount of cover for the children.”

For CIC, for example, there is an automatic addition of up to £20,000 to £25,000 of cover for children, which is underwritten along with the policyholder’s cover.

Currently £25,000 is the maximum although insurance companies are looking into raising this sum as consultations with advisers have flagged the need for higher sums to cater for higher medical costs.

Most cover is limited to 25 per cent of the parent’s sum assured and will protect children until they are 18, although some providers, such as LV=, will cover a child until they are 21 within the parent’s critical illness policy.

Johnny Timpson, protection specialist for Scottish Widows, comments: "The scope of cover available to the child will, in most cases, almost match that being provided to the parent."

Also, the majority of providers offering CIC add-ons for children will pay out for nearly all the serious illness conditions the provider covers for adults. For example, the LV= covers more than 60 conditions. 

Peter Hamilton, head of strategic partnerships for Zurich, believes the provision of automatic child cover has been a real benefit for families.

He opines: “Most CI policies include benefits that pay out in the event of a child’s illness and the breadth of this coverage has grown over the years.

“The cover is not separately underwritten, and so is normally automatically incorporated at no extra cost, and provides a very real benefit to parents at a time of huge stress.”

Often, depending on the policy, this comes with automatic access to the support services attached to the policy, such as 24-7 care helplines, virtual GP services and second opinion services. 

Buying more

However, there is the option of buying more to add onto a policy. For example, VitalityLife offers an optional serious illness cover to be added onto any policy.

This allows customers to add an extra £100,000 illness cover for each child named on the plan, without further underwriting.

The serious illness cover policy will also include cover for the death of a child, complications of pregnancy and congenital diseases for newborns. 

Most policies will cover illnesses such as childhood leukaemia, which according to Mr Timpson, is the "health event giving rise to the majority of children's illnesses". 

While the National Health Service will provide excellent care to the best of their ability and resources, there will be many instances where clients need additional help in meeting expenses, whether that be going private, having additional care, dealing with an ongoing health problem or meeting the costs of travel. 

Mr Timpson elaborates: "CLIC Sargent figures found just 6 per cent of parents have received help from the NHS's healthcare travel costs scheme. 

"With a maximum household income threshold of just £16,000 to qualify for that scheme, many families earning just above this income threshold, and where a child has cancer, are left struggling without the financial support they need."

According to data from the cancer charity, parents can spend an average of £600 a month in additional expenses during their child's treatment, which means without any form of insurance cover, they are often having to rely on donations, loans and charity grants.

Having cover in place can make a significant difference.

Mr Hamilton adds: “While the sum assured is typically limited up to £25,000, the money can make a material difference to someone’s ability to meet additional expenses, which might include private treatment, accommodation or time off work, all at a traumatic time.”

Speed and service

With the innovation that technology brings, cover can be put in place, directly online or over the phone. 

According to Paul Dalgliesh, head of protection propositions at Aviva UK, cover can be put in place the same day, so it can be relatively easy and straightforward for a client to obtain protection for them and for their offspring.

Moreover, as Scottish Widows' Mr Timpson points out, there have been moves in the income protection (IP) market, too, to make it easier for parents when their child or a family member suffers an illness or has an accident.

He adds: “The IP market has a small number of providers now offering a claim benefit should the policy holder have to leave the workplace to provide full-time care to a member of the family.”

simoney.kyriakou@ft.com