My client has recently purchased a life and critical illness (CI) plan and noticed it included free child's cover, although it does have significant exclusions. She is now interested in covering her child to the same level of herself and her partner. What approach should I take to covering a child?
Ed Stuart-Brown, Friends Provident
This raises some very interesting issues and you may be surprised to learn that claims on children's critical illness (CI) account for the fifth largest cause of claims. Assuming the child is a minor the parents cannot buy a policy to cover the child, nor can they increase the sum assured for the child on this policy. As the child does not contribute financially there is no financial loss that would result if the child were to fall ill.
Children's CI cover pays out up to £25,000 per policy so if the parents want a higher amount they could consider taking out two single policies, they could then claim on both policies if the child were to develop a CI. The cost of two single life policies would only cost around 5% more when compared to the cost of a joint life policy for a non-smoking couple in their 30s, but could provide twice the level of children's CI cover.
The parents may require a higher sum assured, but because of a lack of insurable interest, for example, there is no financial loss to insure against, it is not possible to get additional cover for a child. So why do insurers offer this extra benefit?
The reason is to give the parents some additional choices if their child were to fall ill, perhaps to take time off from work to look after their child or pay for additional treatments. One other option they could consider if they are concerned about their child falling ill would be to look into purchasing a private medical insurance policy for all the family members.
Henrietta Oxlade, Bond Wealth Management
It has become the norm for insurance companies to offer a critical illness benefit for children as a free bolt on to term assurance with critical illness. However, as the cover is severely limited (most companies offer a maximum of between £20,000 and £25,000), this can often be only a token gesture when faced with what can be a bottomless pit of medical expenses in the event of your child being diagnosed with a CI.
When covering a child, the primary requirement is to ensure access to the best medical facilities available, with no delay, and that medical expenses are taken care of. Any free benefit from a critical illness policy can then take care of any additional expenses such as the parents having to take a career break or additional child care.
You can also add children on to an existing private medical insurance policy (PMI), and it is definitely worth researching this, as rates vary hugely between providers. Aviva for example, only charge for the eldest child (all other children are free of charge), Axa PPP will insure your child for £9.99 per month, or £8.99 each for two or more children.
If you do not have a policy yourself, Bupa offers stand alone PMI for children from around £22 per month, and provides some reassuring additions such as ensuring that your child sees the same consultant throughout.
Finally, if your child is away at boarding school, check whether your school supports ‘Schools Scheme Private Health Cover' which offers benefits for around £51 per term through Simplyhealth - this can give real peace of mind if your child is away from home.
Deepak Jobanputra, PruProtect
Industry statistics show that children's claims feature in the top five claims categories for critical illness. It is therefore a valid concern that your client has sought to consider additional cover. The emotional impact of a serious illness affecting a child is immeasurable and it is likely that there will be a financial impact.
There may be costs such as accessing private treatment, travel and accommodation to specialist hospitals. In addition, depending on the severity of the illness, there may be a requirement for specialist care and even a requirement for a change to the parents' working patterns. The impact of these lifestyle changes can have a significant financial impact.
Cancer research UK statistics show that around 1,500 new cases of childhood cancer are diagnosed in the UK each year. Nobody likes to think of these things, especially when it relates to children. This makes it even more important to know that cover is available that could at least reduce the financial burden at a time of difficulty.
On top of the basic cover it is possible to provide additional serious illness cover of up to £100,000 for specifically named children within the PruProtect plan. Cover can be provided for children between the ages of three months and 18 and will protect the child against up to 154 serious illnesses. As an example of costs, a further £10,000 optional serious illness cover for a child aged five can be added for just 74p per month.
