The following is a guest article by Michael Challiner. Michael is a journalist specialising in Personal Finance topics.
Ensure that your critical illness policy automatically covers your children. This article explains why it's so important.
Children Cover In An Undervalued Asset Of Critical Illness
Cover for your children is the most undervalued aspect of critical illness insurance. But as most policies automatically provide the cover as a free extra, we suspect that some policyholders don't even know they've got it -
- Most policies automatically insure your children though at a lower level of benefits than the main policyholders cover
- But this cover is invaluable, especially if your child becomes critically ill and you need to take time off work to provide care
- Critical Illness insurance pays out a tax free capital sum if the policyholder, or one of their children, suffers one of the serious illnesses scheduled on their policy
- The only rider is the claimant must survive at least 28 days after the diagnosis
Stop Work To Care For Your Child
Scottish Provident, one of the UK's largest critical illness insurers has announced that claims for children is now its fourth-largest cause for a claim. Says Nick Kirwan, their Protection Marketing Director, “Work takes a back seat when your child becomes ill. You may need to cut your working hours or even stop working altogether”.
If your critical illness policy does insure your children, then a payout from the policy gives you the financial flexibility to do just that. So how much will they pay out?
- Most insurers will pay a proportion of total insured value if a child becomes critically ill
- For example, Norwich Union will pay out 50% of the insured sum or £10,000 whichever is the lower - and this cover includes adopted children and step children
- Standard Life and Legal & General also pay up to 50% with Standard setting the maximum payout at £25,000 and in L&G's case it's £15,000
Cover never starts as soon as the child is born. With some policies cover starts up at 3 months but others wait as long as three years. Ideally, you want cover to start as early as possible.
Another other point to understand is that if the main policyholder has a claim, then the policy pays out and terminates – they can't claim more than once. But if there is a claim for a child, the policy does not stop – the cover for the policyholders continues unaffected. And if you start or add to your family after you've started the policy there's no need to tell the insurer as the cover automatically covers all your children.
When You Sign Up For Equity Release Check Exactly What/Who Is Covered
Not all insurers will insure your children. Neither the Halifax, National Westminster nor Nationwide Life include any cover for children. So if you have or intend to have a family, it's vital that you tell your adviser and then he or she will ensure your policy includes the necessary cover.
It's Dangerous To Sign Up For A Policy Online
You can buy Critical Illness insurance online all by yourself but honestly it isn't worth the risk.
In our experience over 50 % of DIY buyers don't get it exactly right. There is little standardisation within critical illness insurance so you're unlikely to get your ideal policy if you buy on price alone. It's one of those situations where a low price can turn out to be a costly mistake.
- In order to get the ideal policy your adviser need to understand how much you can afford and what aspects of cover are most important to you
- It's then a matter of using experience and product knowledge to find the best options - If this sounds like a receipt of throwing your discounts down the drain, it isn't
- Few high street brokers will give you any discount but shop online with one of the specialist critical illness brokers and you'll get full service and a discount
How do you find them? Well, it's easy. Just type in “Critical illness insurance” into your favourite search engine - but ignore the web sites run by the insurers themselves – they just offer you their own policies and you need a broker who can consider the whole market.
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