It’s the stuff made of nightmares, nevertheless it does need to be taken into consideration. I’m stating the obvious here, but children are just as susceptible as adults to debilitating diseases or injuries that may result in permanent disability or death. What many parents don't realise until it’s too late is that it’s just as important to insure their kids as it is themselves in order to be prepared financially should something happen.
According to the Australian Institute of Health and Welfare, during 2002 and 2003, there were over half a million hospitalisations recorded for children aged 0 to 14 years old. You can imagine the specialist medical costs involved for the hospitalisation of a child – it’s not cheap.
Here’s an example from ING of how chid insurance was used after tragedy struck a family:
Ross and Anne, who are both farmers, have two children – Emily, 5, and Matthew, 9. On the advice of a financial planner, Ross took out a child insurance policy for each of the children a couple of years ago to the amount of $100,000. His financial adviser also assisted him in arranging his own life cover with optional trauma as well as total and permanent disability covers.
One night while the family were asleep, an electrical fire started in the kitchen and quickly spread throughout the house. Ross and Anne managed to get Emily out, but couldn’t get to Matthew’s bedroom quickly enough.
Matthew suffered third degree burns to 40 per cent of his body and had to remain in hospital for some time to receive extensive treatment for his injuries. Ross, Anne and Emily’s burns weren’t as severe and they recovered after a few weeks.
Ross made a claim on the child insurance policy he had taken out for Matthew two years earlier. The insured amount of $100,000 was paid as a lump sum and was used to pay for immediate and future medical expenses as well as rehabilitation and any home modifications that may be needed when he returned to the farm later down the track.
As Anne often travelled to the hospital in the city to visit her son, the accommodation benefit also came in use. Life for the family will never be the same, but the financial burden was met because Ross took out a child insurance policy to prepare for this scenario.
This is just one example where the child insurance policy came into use. Other trauma conditions covered under the child insurance policy include: benign brain tumour; cancer; deafness; encephalitis; loss of limbs or sight; major head trauma; meningitis and/or meningococcal disease; quadriplegia; stroke; and terminal illness.
Child insurance is basically life insurance for kids. If an insured child suffers from a specified trauma condition, or dies, the insured amount is paid as a lump sum to the parent or guardian. It is designed to be an extension of your own insurance, so it’s taken out as a part of a parent or guardian’s policy.
There is also the option with some policies to convert it to life insurance with optional trauma insurance once the child becomes an adult.
Of course, you need to do the research before settling on a particular policy. In order to make an informed decision, you should speak to a financial adviser, and Switzer Financial Services would be happy to discuss your needs and circumstances.