Children’s Critical Illness Insurance
Raising a child is one of the most rewarding and joyous things we can do in life. But, ask any parent and they’ll also agree it can be worrying, stressful and emotionally draining at times. No time is this truer than when your child is ill.
It’s hard to imagine your child becoming critically ill, in fact it’s a thought that we all try to avoid. But sadly it can happen and if it does, there’s several potential hazards for parents to consider:
- Work – Could you continue to work and would you want to if your child was seriously ill?
- Treatment – NHS waiting lists are a sad reality even for kids. Would you want the option to consider private medical treatment?
- Family – How much could your support network help you?
- Costs – Hospital parking, fuel and extra childcare costs are just a few of the potential extra associated additional costs. How could you pay for these?
This is where a children’s critical illness plan can help.
As with all types of personal protection, a payout on children’s critical illness will give parents choices. We can never know ahead of time what we’ll need or how we will feel in such a harrowing situation, but we can give ourselves options.
Some people choose to go private to speed up their child’s treatment or recovery, some give up work or reduce hours to care for their child and others use the money for a holiday of a lifetime. There are no rules on what you use the payout for, it’s totally up to you.
Do I already have children’s cover on my existing critical illness policy?
Check your policy documents if you already have an adult critical illness plan. Adult plans sometimes come with free children’s cover and sometimes it’s an extra cost.
Even if your policy does not currently have children’s cover, your policy may have a “Guaranteed Insurability Option” that would allow you to change your policy to include it. Typically, you can only activate these options near to a life event, i.e. after the birth of a child, marriage, promotion, pay rise etc. Check your policy documents carefully and look for “GIO’s” or “Guaranteed Insurability Option“.
It’s important to note that the payout amount will not be the same for your child as it is for you. Again, insurers differ in this area but most payout a percentage of the value of your policy up to a maximum amount. For instance, at the time of writing Aviva will payout 50% of the value of your policy or £25,000, whichever is lower.
You may be able to increase this amount by having both parents insured and therefore doubly covering your child. As always, be sure to check the policy wording to ensure this is allowed with your chosen insurer.
Most insurers will not deduct the value of your children’s critical illness claim from your cover. This means you may still claim for yourself should you need to. Most policies however will only allow one children’s critical illness claim per insured adult.
What medical conditions can you claim for?
According to Aviva; In 2019, nearly half (48%) of children’s benefit claims received were for cancer. 
In the UK one child in 500 will develop some form of cancer by the age of 14.
Other conditions Aviva received children’s benefit claims for include:
- Benign brain tumours
- Heart surgery
- Intensive care benefit
The conditions covered often differ from those on adult policies. Most companies used to exclude familial conditions. Nowadays better policies include conditions often found at birth such as spina bifida, muscular dystrophy and cerebral palsy.
Some insurance companies also now include a separate payout for pregnancy-related complications such as Eclampsia, Ectopic Pregnancy and Stillbirth.
Insurers clearly lay out critical illness definitions in the policy terms and conditions. It’s important to read these carefully as the insurer will only payout if a diagnosis meets their wording. The Association of British Insurers sets the standard wording for a number of key critical illnesses. However, most insurers now go further than needed and also meet or exceed the ABI+ definition meaning it’s easier to make a claim for a less severe condition.
Eligibility for children’s critical illness cover
Each insurer has their own eligibility wording. Most opt to include children between the ages of 30 days and 18 years old. If a child stays in full-time education beyond the age of 18 the cover could extend until their 23rd birthday (dependent on what insurance provider you choose).
Policies typically include children in the cover if you are their biological parent, a stepparent or you have legally adopted them. Some insurers have also extended their wording to include children you live with and legal guardians. If in doubt, ensure you speak to a whole of market broker who can help you find an insurer fit for your needs.
Most insurance products have standard exclusions. It’s important to fully understand what these are before starting your application. The last thing you want is to pay premiums for a protection policy that is actually invalid.
- Typical standard exclusion on children’s critical illness policies are:
- Your child’s condition is present at birth
- The symptoms first arise before the child is insured (pre-existing conditions)
- The child dies within 14 days of meeting the definition of the critical illness
- This is not a comprehensive list nor is it universal to all insurers. To ensure your cover will be valid, it’s important that you fully disclose your situation to your broker or insurance company.
Support for parents if your child is hospitalised
Witnessing a child in a hospital bed is a stressful and emotional affair. As parents we instinctively console and care for our children’s needs, but often in a hospital we’ll feel helpless. This leaves us very little headspace to consider the financial impact of the hospital stay. Luckily for us children’s care with the NHS is free. However, other costs such as lost income, the cost of fuel, parking and childcare are not.
Some children’s critical illness policies seek to help at these times by offering an additional payment for each night your child is hospitalised. Currently, the companies that offer this additional benefit pay £100 per night your child spends in hospital after a set waiting period. The maximum amount of days you can claim for vary between 7 and 44 days dependent on what policy you choose.
The emotional turmoil is bound to initially outweigh any financial pressure when a child is hospitalised. But, the costs will add up. An additional one-off payment could give you one less thing to worry about at an already stressful time.
Funeral cover for children
Losing a child to a critical illness will make even the simplest daily activities difficult to handle. Having to plan and pay for a funeral is something no parent should ever have to endure. Sadly, many parents go through this process each year and often are shocked at the costs involved. At an already emotionally challenging time, it doesn’t bear thinking about the prospect of not being able to afford the funeral.
Children’s funeral cover is like life insurance in that the parent receives a benefit to go towards the funeral costs. Although, the amount that policy provider will pay varies and they have exclusions, so it is important to check your policy carefully.
The main financial surprise is likely to be the ever-increasing cost of a funeral. The average cost of a funeral in the UK in 2020 was £4,184. On average, a cremation was £1,148 cheaper than a burial.
Many families simply do not have that sort of money lying around. In recognition of this, most insurers offer a facility whereby they pay an advanced payment while the full claim is being processed.
The total amount currently paid for children’s funeral cover ranges from £5,000 to £10,000 dependent on your insurer.
Making a claim
When we pay insurance premiums for any type of cover, we hope for a smooth claims process. When the claim arrived because of ill health, your insurer will need to validate your claim. Insurers report an average claim payment time between 4 to 12 weeks.
To start the claim process you’ll normally need to phone. Some insurers then require a claim application form to be completed, others will record the basic details of the claim over the phone. Often the insurer will then ask you to send in some additional details. You can prepare for this by preparing:
- Medical evidence to support the claim
- A signed Access to Medical Records Act Declaration (AMRA)
- The original policy documents.
Your insurer will then try to determine if your claim is for covered conditions. Remember, you’ll need to keep up your payments while your claim is being processed. Otherwise you risk invalidating your cover and your claim.
We hope you never need to make a claim. While that sounds like a “waste of money”, we’d sooner have that than needing to make a claim for a critical illness.
The latest figures from the ABI show that 91.3% of critical illness claims are successful.
The main two reasons for claims not being paid are non-disclosure of relevant medical information, and the condition not being covered. This further highlights the importance of answering the application questions accurately and truthfully for your insurance broker or insurer.
An option for your children’s future protection
Children are forever outgrowing things. Usually this results in what feels like a never ending buying cycle for parents. However, when a child outgrows their children’s critical illness cover they tend to be financially exposed and totally unprotected.
As a young adult, the last thing on your mind is financial protection. The industry group UK Finance estimates the average age of first-time buyers to be around 30 years old. This may be the first time your child has a protection conversation with a protection specialist.
A few forward thinking insurers have spotted this issue and come up with a solution. They call it “child conversion option”.
It’s a simple yet effective idea. When the child’s critical illness cover element runs out, they offer the new young adult a policy of their own. While that may not sound too radical, there are a couple of benefits:
- It’s a proactive offering, possibly stirring up a thought process no one else would have at this point.
- They usually offer the protection without any medical underwriting. This means they may offer cover that they’d have otherwise had declined for if they already have a chronic medical condition.
- Cover is cheap when you’re young.
Unfortunately, only 3 insurers currently offer this service for life insurance and shockingly only one for critical illness. Hopefully, in time, more companies will spot this as an opportunity to help our children learn the importance of protection early in their adult lives.
How to compare critical illness options?
Comparing life and critical illness options on your own can be difficult. The raft of financial jargon can leave you feeling like you’ll put it off until another day. As parents we’re so busy, chances are we may never get the time and headspace on “another day”.
The simplest option is to speak to a fee-free non-advised whole of market broker. They’re obliged to give you all the facts and relevant choices and let you then decide what’s best for you.
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