Changing the market in children’s critical illness cover

Children’s cover is an area of the critical illness market that is still evolving. That affords plenty of opportunity for forward-thinking providers like Zurich to innovate, add value and improve customer outcomes.

The importance of children’s cover cannot be underestimated. Although it may be hard to contemplate the prospect of a child becoming ill, that thought is all the more sobering without a financial safety net.

Children’s cover provides a valuable financial payout at a difficult time. The money is often used to enable a parent to take time off work to help care for a sick child. It can also be used to pay for private treatment, make any necessary home adaptations and enjoy the ‘good’ days by doing activities or going on holiday.

And it is not just for biological children. Children’s cover should reflect modern family structures, and also be relevant for step-parents, adoptive parents, parents through surrogacy and legal guardians.

With Zurich’s children’s cover, customers have greater choice than ever before, which brings a host of benefits to advisers and their clients.

1. You choose the level of cover

While some providers tout that they offer children’s cover ‘for free’, the reality is that the cost is rolled into the cost of the adult policy – and that bill is footed by customers who do not have children as well as those who do.

Zurich has long taken a different approach. Children’s cover is an optional extra, and that means customers only pay for cover that is relevant to them. Customers can choose from two levels of cover, Children’s Cover and Children’s Enhanced Cover.

But crucially, there is even more flexibility to choose the right level of cover for each individual because Zurich’s children’s cover is also decoupled from the adult cover. This means a customer who holds core adult critical illness cover can now take out enhanced children’s cover.

Children’s Cover provides a payout for a total of 41 conditions, while Children’s Enhanced Cover provides a payout for 86 conditions. The more comprehensive option covers things like epilepsy, type 1 diabetes, less advanced cancers and certain heart and neurological conditions.

One key difference between the two levels of children’s cover is that the enhanced cover includes child permanent dependence benefit. Similar to total permanent disability benefit that can be added to any adult policy, this provides a payout to help care for a child who is unable to live independently for whatever reason.

Child death benefit and hospital stay benefit are included on both levels of children’s cover. The former pays £5,000 if the child dies between the ages of 30 days and their 22nd birthday. The latter pays £50 per night from the seventh night of a hospital stay.

“Hospital stay benefit is designed to help meet the associated costs of a child being in hospital, such as parking, food and accommodation” says Lewis. “At what is likely to be a stressful and emotional time in a family’s life it gives that little bit of financial support.”

2. You choose the sum assured

Customers can choose the sum assured based on what would be a meaningful amount to give them financial breathing space should their child become seriously ill. Importantly, this is not linked to the adult sum assured.

We recognise that the need for children’s cover is totally different. If I get ill, the need is probably to pay off my mortgage and concentrate on me getting better so that I can get back to work and earn money.

“For a child’s critical illness, the need is different. I need the money to allow me to do whatever I need to do to look after my child. That is totally different, so why should it be related to how much my mortgage is? It would be more relevant if it was linked to my salary than my mortgage.

"So children’s cover can be any sum assured between £10,000 and £100,000 – the customer and adviser can choose whatever sum is most appropriate based on the need and the budget."

An example of the benefit of this in practice is someone who has paid down their mortgage with an inheritance.

“Say they earn £100,000 and their child got ill, £25,000 isn’t really doing much for them – it would only allow them two months off work,” says Lewis. “They might want six months, nine months, 12 months off or they might want to never work again. They arguably need more children’s cover than they do adult cover.”

3. You benefit from a fixed payout

Often critical illness cover is set up to decrease in line with the mortgage. Whereby the children’s cover is linked to the adult cover, that means the potential benefit is continually falling as the mortgage is repaid.

Zurich provides level children’s cover. “Because the need stays the same, the cover should stay the same,” says Lewis.

The payout amount is also the same for all critical illness conditions.

“There is a two-tiered system in the market where you get more or less money depending on the condition,” says Lewis. “But if you strip it back to need, does it matter if it’s cancer or epilepsy? I need the money to look after my child.

“What customers really want to know is that irrespective of which condition their child has they will get a certain payout.”

4. You choose an optional extra

Zurich also have an optional extra called Pregnancy and Early Childhood Cover, which can be added to either tier of children’s cover.

This means that customers who have older children and have no intention of adding to their family do not have to pay to cover conditions that would be diagnosed either during pregnancy, at birth or during early childhood.

These include congenital conditions, such as cerebral palsy, Down’s Syndrome, muscular dystrophy and spina bifida. Once the child reaches the age of seven and this cover is no longer needed, it can be removed – and the premiums will reduce accordingly.

“You should only be paying for what is relevant to you,” says Lewis. “And the beauty of the various building blocks of our children’s cover is that they allow advisers to confidently create bespoke and relevant cover for clients and their families.”

5. You choose where to add the policy

Children's cover can be added to a life-only policy, a life and critical illness policy or a standalone critical illness policy. Attaching children’s cover to life cover could be a sensible option.

“Someone who due to their medical history may not be able to get critical illness can get life cover and still choose critical illness for their children,” says Lewis. “Or if the adviser’s recommendation did not include critical illness for the adult but did include life only, again the client can cover their children.”

Such an approach also allows the cover to run for as long as it is needed.

“When an adult claims on a critical illness policy, the policy ends but my need for children’s cover hasn’t ended,” says Lewis. “Life cover pays out on death and that’s actually when my need ends, because when I die my need dies.”

6. You benefit from full flexibility

Altogether, Zurich’s critical illness cover allows advisers to truly align the product being recommended to the client’s needs – and that applies to families as much as it does to those without children.

It also applies throughout the term of the policy because each policy can change and flex as the needs of the customer change. A customer can move from Children’s Cover to Enhanced Children’s Cover or vice versa and increase or decrease the sum assured as their personal circumstances and budget change.

“Having done a full fact find financial advisers can create a package of protection solutions for the client and we want to ensure that they can do all of that with Zurich,” adds Lewis.