What if your child became seriously ill?
Posted on February 14th, 2010
Critical choice: Is your child covered for a serious illness? Photograph: Burger/Phanie/Rex Features
The prospect of a child falling critically ill is something we just don’t want to think about. Which is why the vast majority of critical illness insurance policyholders don’t even know whether their offspring are included.
Claiming for children is, sadly, not uncommon. Scottish Provident, for example, reports that they are the fifth most common claims after heart attack, cancer, stroke and multiple sclerosis.
Ed Stuart Brown, head of protection at Friends Provident, says: “Looking at the latest data in 2008, a shocking 4% of claims were for children – most of them for cancer.”
Matt Morris, spokesman for independent specialist adviser Lifesearch, warns: “Many people take out critical illness policies which pay out if they get a serious illness, but very few consider what they would do if their child was diagnosed with one.
“They may need to take more time off work than if they had fallen ill themselves, draining their finances and putting untold stress on the family.”
He adds: “Partly because it’s a highly sensitive subject, few people are aware cover for children is even available.”
Axa, Friends Provident and Legal & General all incorporate cover for children within their standard policies. Yet other well-known insurers, such as HSBC, Foresters and Direct Line exclude children.
Paul Cowman, head of life insurance at Direct Line, said: “It is something we have considered and may include in future.” And, as Direct Line sells direct to the consumer, it is down to applicants to ask the right questions.
“We are very clear about the coverage offered by our policies and, while we don’t offer advice on the suitability of our products, we are happy to answer any questions our existing and potential customers may have about what our policies cover,” says Cowman.
You will not necessarily pay more for your premiums if children are incorporated. For example, according to Lifesearch, a 30-year old male with £100,000 of combined life and critical illness cover taken over 25 years will pay £29.05 a month at Direct Line. This compares with £26.85 at Axa which also covers children’s critical illness.
However, Jason Witcombe at independent adviser Evolve Financial Planning says it’s almost impossible to compare like with like.
“With life insurance, the top 10 providers offer similar premiums, as, quite simply, you are dead or alive. But when it comes to critical illness there are a whole raft of variables such as illnesses covered, definitions of those illnesses before you can claim, and rules on pre-existing conditions.”
He adds: “Whether the policy includes children is one of a whole host of pricing factors and, of course, not everyone has kids. It all has to be weighed up.”
What policyholders don’t want, however, is to find out too late there is a gap in cover. It is vital, therefore, to check carefully the terms of a policy before signing up. Take financial advice if you are not sure. If you already have flexible benefits through work, you can often apply for an extra layer of critical illness cover, such as for your child. “This will probably work out the cheapest, so should be your first port of call,” says Witcombe.
If you take a critical illness policy without children, and then go on to have them, they will be incorporated at no cost – but only if the insurer offers children’s cover in the first place.
Parents should also bear in mind that the maximum payout for a child on a critical illness policy is capped, usually at around £20,000 or 20% of the sum assured, according to the Association of British Insurers. Claims can typically be made for children aged between 30 days and 18 years.
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