Do my children need Life Insurance?

Life Insurance -

Straight-talk on a sensitive subject can help families stay afloat in extremely emotional waters.

It's a scenario no parent wants to contemplate: their child suddenly suffering a life-threatening illness. How does one cope with such a nightmare, and is there any kind of financial safety net available? Insurance expert David Wilkinson provides solid and straightforward information on Child Life Cover so that parents can make the smartest decisions for their own family.

What is child life insurance and is it any different than it is for adults?

A Life Insurance benefit payable on the death, terminal illness or critical illness of a child is essentially the same type of cover as that available for adults.  The insurance cover is of a risk-only nature with benefits payable only on the death, terminal illness or critical illness of the child.


Is a child's life insurance policy simply added onto their parent's policy?

Yes. Generally speaking, life insurance cover for children is available as an additional benefit in a life insurance policy for an adult.  Standalone child’s cover is not widely available in Australia.


How old does the child have to be?

Child’s Life Insurance Cover is generally available for children after they have had their first birthday and can usually be renewed until age 18 for financial dependents.


What are some arguments for taking out life cover for a child?

The unexpected death, terminal or critical illness of a child can be difficult to manage financially, as well as emotionally.  While Medicare, private health insurance and the Pharmaceutical Benefits Scheme (PBS) will likely cover the cost of medical and hospital treatment and help with access to ongoing medication, there may be out-of-pocket expenses that are not recoverable.  Additionally, a parent may need to cease or reduce their work in order to care for a sick child and this can result in financial strain for the family.  A Child’s Life Insurance benefit could provide a financial safety net to help the family get through a very difficult time.


No parent wants to contemplate the prospect of a healthy child dying young. Is this a common argument against taking out life cover for them?  

It’s understandable if people find the thought of insuring their child’s life unpleasant, but insurance exists to help people manage the consequences of unexpected financial loss.  The loss of a child, or a child’s critical illness, can result in a family facing financial difficulty and this can be avoided with the benefit of Child’s Life Insurance cover.


Does TAL offer child cover?

TAL offers cover of $10,000 per child for loss of life, terminal illness and critical illness in the TAL Accelerated Protection product suite.


How is a claim paid out?

Critical Illness cover for children provides for the payment of benefits in a lump sum if the child suffers events such as severe heart disease, cancer, loss of the use of limbs or sight, severe burns; if he or she requires an organ transplant and for a limited range of severe illnesses that a child may suffer before reaching adulthood. Each insurance policy is different, so before taking out cover, read the Product Disclosure Statement  and consider whether the cover is appropriate for your own needs and circumstances.


Can life cover for children be combined with a savings plan for higher education?

Less commonly available today, but common some decades ago, were child endowment life insurance plans, which had both an insurance and a savings component.  These policies could be taken out to save for a child’s education or to provide them with a lump sum of money at, say, ages 18, 21 or 25. These products were phased out in Australia in favour of other ways of saving for an education. Insurance bonds  can be a tax-effective way of saving for the longer term, and can be used to help fund the future education of a child.


What other kind of things should parents consider when thinking about taking out a life insurance policy for a dependent child?

The earlier Child’s Life Insurance cover is taken out, the better.  Comprehensive cover may not be available if a child has already developed a medical condition. 


If a child comes down with a grave illness, is it too late to take out a policy for them?

Unfortunately, yes.  Child’s Life Insurance Cover cannot usually be taken out for existing medical conditions.


Is there any cover that a parent can take out if their child is suffering a grave illness?

One alternative that may be considered is funeral insurance cover. Funeral insurance cover is usually only for accidental deaths for the first 12 months and for other causes of death thereafter. Funeral insurance for a child can be added to the adult’s policy. You are unable to take out funeral insurance for a child on its own policy. It’s a terrible thing to contemplate, but funeral insurance may be the only option available for loss of life cover for families with a gravely ill child.

How much is Life Insurance?

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