Life Insurance for Children
Life insurance for children is a very difficult topic to discuss with clients, as no one wants to think about losing their children. Whilst difficult to have, it can be an important talking point regarding full family protection. This blog will outline the benefits and reasons to consider cover for a child.
Understanding Insurance for Children
Insurance for children typically comes in two types - life and trauma (or critical illness). The life cover component covers unexpected death or terminal illness and the trauma component covers specific medical events which can include but are not limited to certain types of cancer, loss of hearing or speech for example. Each insurer will vary in which trauma events they cover, and the full list of medical events should be available in their Product Disclosure Statement (PDS).
Why To Consider This Cover
1) Financial Security in the Event of Tragedy
For the same reasons we take out insurance for ourselves, we consider cover for children to provide financial security to get through an extremely emotional time. Whilst there can be government support to help cover some of the costs, there may be out-of-pocket expenses that are not recoverable. Further, we would expect that the parents would need time from work to support the family which can result in a financial impact on the family. Insurance can help alleviate these financial burdens, allowing families to focus on recovery and support rather than financial concerns.
2) Obtain Cover Early in Life
Insurance cover is generally underwritten at the time of application. The earlier cover is applied for and accepted it can assist with obtaining cover whilst in good health. We typically find as we age, health conditions and medical concerns arise which can make it difficult to obtain insurance cover at standard rates. Some policies offer the ability to convert a child policy to a standard adult policy at a particular age without medical underwriting which helps with future insurability. This policy can then be held to support the adult’s family and their obligations later in life.
3) Combining to an Existing Policy
Depending on your existing cover, some insurers are offering the ability to apply for child cover as a feature of the parent’s policy. This can be a useful way to cover the entire family under one insurer, ensuring a level of protection for all. Please note, that this is a feature that not all insurers provide, and appropriate research would need to be undertaken for your specific needs.
Disadvantages of Insurance for Children
The primary downside to having insurance for children is the opportunity cost. The money spent on premiums could potentially be spent or invested elsewhere. It’s important to consider the benefits against other opportunities for the children such as savings or investment accounts. Families should evaluate their financial situation and priorities to determine if insurance for children aligns with their overall financial plan.
While the topic of life insurance for children is difficult, it is an important consideration for comprehensive family protection. By understanding the types of insurance available and weighing up the benefits and potential drawbacks, families can make informed decisions about the best ways to safeguard their loved ones. If you have any questions or need guidance on choosing the right policy for your family, consult with a financial advisor to explore your options and ensure you’re making the best choice for your specific needs.
After working as an advisor for a decade, Joel founded Unified Wealth.
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