It’s the fact of life that nobody likes to think about – what happens if your child becomes ill? Sam Barrett looks at some of the options available across the health insurance and protection sectors
With the new school year underway, parents can look forward to their kids bringing home a collection of bumps, scraped knees, coughs and colds. But, while these are a normal part of growing up, the insurance industry is keen to tap into parents’ fears about their children’s health, with products covering everything from a trip to the dentist to payments for serious health problems.
“Children can be included on medical insurance schemes and healthcare cash plans and many parents will find there’s also some cover for their children included on their critical illness cover,” says Mike Blake, compliance director at PMI Health Group, the national intermediary. “It’s a niche market but we do see some demand from customers wanting to cover their children.”
While children are usually an add-on to a parent’s policy, in the medical insurance market it’s possible to buy a policy specifically for a child. AXA PPP healthcare has First Healthcare, which covers the standard range of diagnostic tests, inpatient and outpatient treatment, radiotherapy and chemotherapy and includes provision for a parent to stay in hospital with their child. It costs £12.99 a month for one child, or £11.69 if more than one child is covered.
Aviva UK Health is also active in this market, underwriting a plan for Childsure. This offers similar cover to the AXA PPP plan but with the notable addition of up to £300 towards routine dental treatment, subject to a £50 excess. This is available at a special rate of £9.99 a month per child until December 1, after which the premiums increase to £13.63 a month for the first child, £12.63 for the second and £6.57 for the next three.
But, while these policies enable children to be covered independently, there’s some cynicism among advisers about their value.
“The most cost-effective way to buy medical insurance for children is through a corporate scheme. Rates are cheaper and you may benefit from enhanced underwriting terms,” says Kevin Jones, SME new business director at Jelf Employee Benefits, the advisers. “Most insurers will charge half your premium to add children, regardless of how many you add, which can work out more cost effective than buying separate cover in many cases.”
While the cost-effectiveness of child policies will depend on the size of the family, Blake has more fundamental questions about the value of medical insurance for youngsters.
“Medical insurance is about elective surgery, which becomes much more prevalent as you get older. Children are well looked after by the NHS,” he says. “A parent might want to use medical insurance so their child could see a consultant quickly but at around £200 it would probably be simpler to self-insure this.”
Where children’s cover is more established is with healthcare cash plans. Many policies include children automatically or they can be added at a low cost. For example, Simplyhealth and Health Shield include free cover for children, with Simplyhealth specifying a maximum of four kids. Westfield Health includes free cover for children up to the age of 18 on its Mosaic plan and this cover can be included on its Foresight plan for as little as 7p per employee per week.
There are differences in the amount of benefit children receive. For instance, while Westfield spreads the adult benefit between the children, Health Shield gives each child the same benefit as their parent, with obvious exclusions for maternity and parental hospital stay.
But this difference could be immaterial as benefit requirements for children are generally lower than for their parents. Children enjoy free NHS dental care, eye tests and optical vouchers. There can still be bills though as Lara Rendell, marketing manager at Health Shield, explains.
“The NHS provides cover for the basics but if a child wants different glasses or some dental work carried out privately, a cash plan is useful,” she says.
Additionally, it’s not always guaranteed that a child will be able to find an NHS dentist. Figures released by the NHS Information Centre show that 26,000 fewer child patients were seen by the NHS in the 24 months to June 2011 compared to the same period to March 2006. Further Simplyhealth’s Dental Survey 2011 found that 7% of parents struggled to find an NHS dentist for their children.
This is illustrated by the difference in claims between children and adults. While optical and dental are the main areas for claims on adult policies, at Health Shield the most common claim for children is optical benefit, followed by hospital benefit and then dental.
“Cash plans work well for children,” adds Blake. “If you have a child who wears glasses or one that plays sports and might need some physiotherapy from time to time it could easily pay for itself.”
As well as looking after the day to day healthcare requirements, the more serious conditions can be covered with a risk product with child cover commonplace on critical illness policies. Receiving a payout can help with the cost of treatment; alterations to the home; lost earnings if a parent needs to take time off work; or towards a holiday of a lifetime.
Most insurers will include a maximum child benefit of £25,000 on their policies. For example, Friends Life and Legal & General offer 25% of the parent’s cover, up to a maximum of £25,000. Scottish Provident, Bright Grey and Aviva give 50% of the parent’s cover, up to £20,000. Additionally, with some insurers, payouts for a child can be doubled if both parents have cover.
The conditions covered are broadly the same as for adults with some exceptions as Steve Casey, head of marketing at Friends Life, explains.
“We won’t cover children for type 1 diabetes, simply because our definition states over age 40, or for total permanent disability (TPD) because of the link to occupation,” he says.
Some insurers have addressed the TPD issue, drawing up a different definition for the under 18s. For instance Scottish Provident classes TPD in children as ‘becoming permanently disabled before age 18 as a result of illness or injury to the extent that for a period of twelve consecutive months the child has been confined to his or her home or hospital and has required medically supervised constant care.” Additionally the disability must be irreversible without any reasonable prospect of any improvement.
While parents are more likely to judge a policy on the cover they receive, claims for children feature fairly high up the insurers’ tables. For instance, Jennifer Gilchrist, senior product development manager for Bright Grey and Scottish Provident, says children’s claims are in the top five claims by number.
It also makes the top 10 claims at Legal and General, where 60 children’s claims were paid in 2010.
“Two thirds of children’s claims are for cancer but other common claims included benign brain tumours, meningitis and kidney failure,” says Alison Manning, head of product development at Legal & General.
Although children’s cover is commonplace on critical illness products, this isn’t the case for income protection. However, some insurers have developed child specific benefits. For example, Scottish Provident includes child benefit of 25% of the parent’s cover up to £5,000 a year, which is payable for five years unless the child dies or cover expires.
“This can give financial stability where a parent needs to take time off work to look after their child,” says Gilchrist.
And while child cover options are available on critical illness and income protection, this is not the case for life assurance.
“Under the Prevention of Cruelty to, and Protection of, Children Act 1889, it became illegal to have an insurable interest in a child,” explains Blake. “You can’t take out life cover for a child.”
Outside of the UK, insurers have included some cover for children on their parents’ life policies. For instance, on its life policy, Irish Life includes €6,000 of life cover for each child under 21.
“There is a financial need,” says Gilchrist. “This could be used towards the child’s funeral costs.”
But, although the UK insurers may acknowledge the benefit of this form of cover, they can only promote the importance of protecting children’s financial security when marketing their products to the over-18s. This was taken a step further earlier this year by PruProtect, when it launched Education Cover as part of its protection range. This recognises the high cost of education, even for those attending state schools, and allows a parent to make provision for this in the event of their death. This includes £750 a year for school costs, university tuition fees and, where required, private school fees.
But, although there are plenty of options to cover children’s health and financial wellbeing, when it comes to recommending them to clients, Jones believes it may come down to a simple economics lesson.
“These are all nice to have,” he says, “but, in the current financial climate, I’m not sure we’ll see a huge demand for them.”