Sibbalds Financial Services (our sister company to Sibbalds Chartered Accountants) are back, answering the questions which you have sent us this week. Today’s question focuses on Critical Illness Cover, particularly how children could also be protected by your policy.
Q. I have been looking into taking out Critical Illness Cover; do plans insure my children as well?
A. While Critical Illness is designed to safeguard a family’s main earners; serious illness of a child can be equally disruptive to finances. This is why many critical illness plans extend some cover to children. This can enable parents to take time off work to support a very sick child or to cover extra costs associated with the illness. In some cases, parents even use the money for private surgery to speed up treatment.
The insurance typically pays out if a child is diagnosed with one of the conditions listed in the policy, although most plans exclude permanent disability and babies in the first three months of life are also often excluded, ruling out those who are born with a serious condition.
The lump-sum payment will not be for the full value of the policy; most companies set it as a percentage of the adult sum assured, usually 25 per cent or 50 per cent of the adult value, with a cap on the maximum paid.
Child cover is a “free benefit” in that the cost of insurance for an adult of a given age is the same regardless of whether they have no children or ten children. But while an adult claim will end the critical illness policy, cover for a parent policyholder remains intact after a payout for a child.
In general terms the cost of cover rises with age. But premiums on standard plans are fixed for the life of the policy, so those who start one while relatively young enjoy lower premiums for the whole term. For example based on monthly premiums from six leading insurers £100,000 of cover for 20 years would cost an average of £17.40 at age 25 (£22.85 if a smoker). For the same cover starting at 35, the cost rises to £32.14 (£51.76 if a smoker). And for someone starting a policy at age 45 would pay £72.33 (£137.52 if a smoker).
At Sibbalds Financial Services we can source the whole of market for you and recommend the most appropriate level of cover to suit your needs and budget.
Image of Salmonella Enteritidis in Colour sourced from USDAgov.