Should traumatic events be an insurance concern for children?
According to the Australian Institute of Health and Welfare, more than half of all deaths in children are caused by accidents, cancer or nervous system diseases. Even though children face many of the same health risks as adults, they may not have equivalent insurance cover.
Does my trauma insurance policy also cover my children?
- Child trauma cover is often included with a trauma insurance policy. It pays out a lump sum if your child is diagnosed with a severe injury or illness specified in the policy. This can help you afford better medical treatment and allow you to take time off work to be there for your child. This type of policy can be purchased as an addition to your own life insurance cover, and is available for parents, grandparents or anyone else who is a child’s legal guardian.
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The comprehensiveness of cover and the benefits available vary depending on the policy and where you got it. Some standard inclusions are:
- Cancers and tumours
- Failure or disease of specified organs
- Specified disabilities including loss of speech, sight or limbs, paralysis, deafness or cognitive loss
- Severe burns
- Diabetes, meningitis, encephalitis, medically acquired HIV and other serious diseases
- Brain damage or traumatic head injury
- Stroke, specified cardiac events, anemia and other specified cardiac or blood conditions
- Other injury, illness or medical misadventure specified in the policy. The exact conditions covered will vary between insurers and policies
Additional benefits on some policies
Other benefits payable by a child trauma insurance policy may include:
- Accommodation cover. These policies can pay accommodation costs so family members can stay with children who are confined to bed on the advice of a medical practitioner. The child is typically required to be a long way from home for this condition to take effect.
- Grief support benefits. Many policies will pay benefits up to a certain limit for counselling and support services to help you and your partner come to terms with the grief of losing a child or seeing them go through a serious health event.
- Conversion of child cover. Many child trauma insurance policies, particularly when bundled with your own life insurance cover, can be straightforwardly converted to adult policies when the child reaches a certain age.
- Funeral advance benefit. Funeral advance benefits are a common feature of life insurance policies that quickly pay benefits in advance to be used for funeral costs and other death expenses. If a claim is subsequently denied, the insurer may take action to recover this. Child trauma insurance policies often include this benefit.
- School fee benefit. Policies from some insurers include provisions to pay for your children’s school fees if injury or illness leaves you unable to meet the costs.
- Carer benefits. You may be able to find policies that pay benefits for parents or guardians who need to take time off work to care for a sick child, even if the illness itself isn’t covered under the policy.
Find child trauma insurance as:
- An optional inclusion or extra policy with your own life insurance cover. The level of child cover here is typically dependent on how comprehensive the parent policy is. Standalone child trauma insurance policies often require you to hold a life insurance policy with the same insurer, and functionally they can be thought of as optional inclusions.
- A free extra. Sometimes life insurance policies will offer free child cover. The benefits available here are typically very limited. These policies are not equivalent to a full child trauma insurance policy.
The type of policy affects both the benefits available and how it works. Features to be aware of include:
- Top-ups. Typical trauma insurance policies let you claim up to 100% of total benefits, across one or more claims with an option for “topping up” your policy.
- Indexation. Child trauma insurance policies can include indexation benefits so benefits keep up with inflation.
- Stepped, level and hybrid premiums. As with other policies, the payment structure of child trauma insurance may vary.
- Limits. The maximum benefits payable depend on the type of policy and its sum insured, and the circumstances of the claim. Look for hard maximums and other limits which may impact your effective level of cover.
- Waiting periods. Most child trauma insurance policies have a waiting period during which you cannot make claims for specified conditions. Typically up to 90 days, this can vary between conditions and applies when you take out a new policy or upgrade an existing one.
The age conditions for children and other child trauma insurance eligibility restrictions vary between providers.
- Expiry ages. Policies will typically expire no later than the year after a child turns 21, but some may finish sooner.
- Specific age ranges. Some policies may have specified age ranges, such as 2–16, during which you can take out cover for your children. These may vary between insurers. You are generally not able to take out child trauma insurance policies on someone over the age of 18.
- Existing policy. You are often required to be a life insurance policyholder with an insurer before you can access child trauma insurance policies with them.
- Relation to the child. You do not typically have to be directly related to get child cover, but you are generally required to be the child’s legal guardian and to live at the same address.
Generally, many of the same terms and conditions apply to child trauma insurance as they do for adults. For example, policyholders typically need to survive for 14 days after a claimable event, so the insurer can confirm it’s a trauma situation and not a death situation, before a policy will pay out. Consider the limitations and restrictions of your own life insurance policy as well as those of the child trauma insurance component when taking out cover.
Roger and Jessica were excited new parents wanting the right level of cover for Tom, their new baby. They chose to get their home, contents, car and life insurance all from the same insurer which included free child cover. It was a slightly more expensive option then their cover before the baby.
Years passed without incident, but on the day of his thirteenth birthday Tom was hit by a car while riding a new bike. Tom would need numerous surgeries, ongoing medical care and extensive physical therapy. Doctors advised Roger and Jessica that only time would tell whether a full recovery was even possible.
Within two weeks of the claim being made, a lump sum of $75,000 was paid out for Tom’s accident. They used this money to move Tom out of their local public hospital and into an advanced private facility, while Jessica used the accommodation cover of the policy to take time off work and stay close to Tom’s hospital. As Tom’s recovery proceeded apace, Roger used some of the trauma funds to pay off credit card debt, reasoning that it was an important expense to have out of the way if Tom took a turn for the worse. More than a decade afterwards, Roger and Jessica looked back and realised that child trauma insurance was one of the best decisions they’d ever made.
- It covered treatments, rehabilitation and physical therapy for Tom that they otherwise would not have been able to afford.
- It paid out a lump sum to be spent as needed. After all the medical costs, Roger was still able to pay back credit card debt.
- The accommodation feature of the policy meant Jessica was able to take time off work and stay with Tom without those costs coming out of the $75,000 lump sum. Staying near Tom was a no-brainer rather than a hard choice.
- The claims made for Tom’s accident did not count towards the limits of Roger and Jessica’s life insurance. They opted to pay more for a separate child trauma insurance policy rather than simply using the child cover option in the policy itself, and specifically checked the conditions of the policy beforehand to make sure of this.
Will you get child trauma cover through your existing life insurance policy?
This is an important consideration because it affects your available options. Most policies will require you to have some kind of related life cover and you might not be able to find the protection you want otherwise.
What other forms of insurance does your child have?
There is some overlap between benefits payable by health insurance and trauma insurance. Consider your other active policies and specifically look at how they overlap, and what your claims options are in these situations.
What are the limits and maximums?
The total benefits payable by child trauma insurance are capped and can vary depending on you and the insurer. Two people might get different limits from the same policy, while one person might get different limits from two different policies.
Does your child cover share benefits with your life cover?
A claim on one could impact the other, using up the benefits. Life cover buy-back or “top up” options may be more important if this is the case.
Does it include indexation for inflation?
The long-term nature of child cover policies means inflation protection can be an important consideration, but is not always available.
What health events does it cover?
As with trauma insurance for adults, child trauma insurance policies cover specific events in different ways. Familiarise yourself with the conditions covered by different policies and consider comparing them side by side.
Can you change the level of cover?
You may want to increase the sum insured at certain points, such as when your child hits milestones like school age and gets more expensive. Some policies may let you do this freely while others will only allow for it at certain times. Look for the conditions around guaranteed future renewability to see how your policy may let you make adjustments.
Is there a maximum number of children you can cover?
Many policies let you cover as many children as you want while others have a limit. If you have six kids and you want cover for them all, avoid insurers with a limit of five or less.
When does cover end?
Knowing when the child cover runs out is necessary for planning ahead.
When is the soonest you can get cover?
Some insurers let you take cover on a child from the age of one, or earlier, while others only offer it from the age of two or later. The most thorough cover possible will generally be gotten as soon as possible. This is because many of the things that will later become pre-existing conditions first appear at a very young age. Finding cover sooner means pre-existing conditions are more likely to be covered later. Remember to take waiting periods into account when considering this.
The exact exclusions depend on the policy, but are generally similar to those found in other insurance.
- Pre-existing conditions. Health issues present from before the start of the policy date are generally not covered.
- Age restrictions apply. Cover is typically only available from the age of 2, and new policies generally cannot be taken out for children over the age of 15 or 16. Cover usually continues until your child reaches the age of 21 or 22 or no longer meets other conditions of the policy.
- No benefits for deliberate harm or injury. The policyholder naturally cannot claim benefits for any harm or injury they have deliberately inflicted on the child, and self-inflicted injuries are typically not covered either.
- General exclusions such as aerial activities, terrorist or war acts, participating in motorised sports and being under the influence of drugs or alcohol still apply to child cover policies.
Generally many of the same discounts and loadings apply to child trauma cover as other forms of insurance. You can expect to pay more for cover of high-risk pastimes, pre-existing conditions and similar, but can also get discounts in the form of:
- Multi-policy discounts. Hold multiple insurance products from the same insurer and many will reward you with an increasing discount.
- Loyalty rewards. Staying with the same insurer for a long period of time can get you rewards or discounts.
- Healthy lifestyle bonuses. Many policies will reward you for staying in shape, and some may also extend this to your children.
- Bundled option discounts. Bundling options with the same policy can be more cost-effective than getting them individually. This is also the case with choosing child trauma insurance policies.