The insurance industry does see a large number of children's claims and fundraising pages for medical treatments and funerals are a stark reminder to us that access to funds can make a significant difference.
In this article, we'll look at how life and illness insurance can cover your child as well as compare life insurance and critical illness insurance products provided by the best life insurance companies in this area.
If you prefer, you can jump ahead to "How to find the best children's life and illness insurance at the best rates"
What is child life insurance?
Child life insurance provides a lump sum payment if a child dies. The tax free money can be used towards anything but mostly it is used to pay for funeral arrangements.
How does children’s life insurance work?
Children's life is available with most term life insurance products. These are life insurance policies that cover you for a set number of years known as the term - this means that they only pay out if a claim is made during the term. You can usually choose a term of between 1 and 40 years.
Children's life insurance insurance is usually a discretionary or additional benefit that is included with or can be added to adult life and critical illness insurance policies.
What is children's critical illness cover?
Children's critical illness insurance pays a lump sum cash benefit if a child is diagnosed with one of the illnesses that the policy covers. The lump sum of money is paid tax free and can be used to pay for treatment or replace lost income while parents take time off work to care for a seriously ill child.
How does children's critical illness cover work?
Most adult critical illness insurance policies provide an element of children's cover included as part of the plan unless the life insurance company offers the children's benefit as a separate add-on.
Children's critical illness cover can insure your child, potentially from 24 weeks gestation right up to the age of 23.
While the critical illness insurance policy covers adults and children, children's critical illness claims are amongst the top five reasons for making a claim.
Why would you need life or illness insurance for children?
Young families buying life insurance will often want to cover all family members, including children. Some parents see it as a way of putting life insurance in place so that the children can continue it once they are adults. Others are acutely aware that unfortunate events can be made much worse without access to adequate funds and insurance can help to bridge this gap.
Critical illness cover provide funds in a difficult situation. If a child is diagnosed with a serious illness the likelihood is that both parents will want to be with their child through treatment and recovery. These types of difficult situations are made more challenging if the parents suffer a loss of income through taking time off work.
Nobody wants to be in a position where they have to make a choice between earning and being with their child and insurance can help with this.
The worst-case scenario is one where a family experiences the loss of a child. Besides the inevitable emotional pain, there is the financial burden of costs associated with funerals and loss of incomes whilst families recover from grief and find their way back to living again.
Like any other insurance, life and illness insurance for children can't stop awful things from happening but can support people financially if and when they happen.
Can I buy life insurance for my child that they can continue when they grow up?
Although many parents believe insurances that include their children can be carried into adulthood, there are very few options to do this. There are a few life insurance companies that will provide critical illness insurances that will insure children and once they reach adult age, the insurance can be converted into an adult policy (see below tables).
That being said, your children, from the age of 17 or 18 years old, can buy full adult life and illness insurance policies which they would be able to continue for themselves. It is wise to buy these types of insurance when you are young because rates are very cheap at this age and monthly premiums can be fixed for up to 40 years at a time. So, in practice, the main reason for buying children's personal insurance policies is to give the family access to funds if the child becomes seriously ill or dies.
Which children's benefits are available?
To understand what benefits are available, we have collated some tables below. The tables show the benefits available and how these differ across different life insurance companies and even between the different products available through each insurer.
Firstly, we'll look at what amount of children's death benefit each life insurance company will provide. Children's death benefit is only available if you buy an adult and/or child critical illness insurance policy. An adult's 'life insurance only' policy will not provide a children's death benefit.
Which insurance companies offer children's life cover?
Where available, children's death benefit pays a lump sum of £4,000, £5,000 or £10,000 if a qualifying child dies within the term of an adult policy.
| Life insurance company / product | Maximum Child Death Benefit Included |
| AIG Key 3 | £0 |
| AIG CIC Start | £10,000 |
| AIG YourLife Plan | £10,000 |
| Aviva | £5,000 |
| Guardian | £10,000 |
| HSBC | £0 |
| Legal & General | £4,000 |
| LV= | £5,000 |
| Royal London Standard | £0 |
| Royal London Enhanced | £5,000 |
| Scottish Widows | £10,000 |
| Vitality | £5,000 |
| Zurich | £5,000 |
Qualifying criteria for children's critical illness insurance
Next, you should understand the rules around exactly which children are covered. We are a country with a growing number of blended families where we may be living with children who are financially dependent on us but may not be our natural, adopted or even step-children. The life insurance companies that stretch their benefits to cover children living with the adult policyholder stand out in this area.
| Life insurance company | Natural Children | Adopted Children | Step-Children | Children for whom you are the legal guardian | Children who live with you |
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Compare children's critical illness insurance
There are differences in how much money is paid out for a child's critical illness claim depending on which life insurance company you choose and which product you decide to go with. Although most policies pay a percentage of the adult's insurance policy, they are capped at a maximum level which is detailed below.
Qualifying ages are also worth checking - if you are starting a family, you'll probably want to select policies that will cover your children from birth and for as long as possible after this.
Royal London, LV= and Zurich have made it possible for children to convert their child benefit within their parents' policies into an adult policy which they can take charge of once they stop qualifying as children.
Children's critical illness insurance comparison
Children's critical illness benefit pays out a lump sum that is usually a percentage of your own amount of critical illness insurance, capped at a maximum amount.
| Insurance company | Maximum Payout | Insured from | Insured until age |
Convertible to adult plan
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| AIG CIC Start | £35,000 | Birth | 22 | |
| AIG YourLife Plan | £50,000 | Birth | 22 | |
| Aviva | £25,000 | 30 days | 18 or 21 (if in f/t education) | |
| Aviva Upgraded | £50,000 | Birth | 22 | |
| Guardian | £100,000 | Birth | 23 | |
| HSBC | £25,000 | 30 days | 18 or 21 (if in f/t education) | |
| Legal & General | £25,000 | 30 days | 22 | |
| Legal & General + | £30,000 | Birth | 22 | |
| LV= | £25,000 | Birth | 23 | |
| LV= Enhanced | £35,000 | Birth | 23 | |
| Royal London | £25,000 | Birth | 21 or 23 (if in f/t education) | |
| Royal London Enhanced | £50,000 | Birth | 21 or 23 (if in f/t education) | |
| Scottish Widows | £30,000 | Birth | 22 | |
| Vitality | £100,000 | 30 days | 18 or 23 (if in f/t education) | |
| Zurich | £25,000 | Birth | 22 | |
Things you should check before you buy children's life or illness insurance
Clearly, there are some significant differences in how children's benefits are packaged up by life insurance companies and these can affect claims and pricing. Some of the choices are quite technical but are important to weigh up before making your decision as to which product to buy. Specialist life insurance advisors* are best placed to discuss your specific circumstances and needs before recommending the policies that will be most suited to your family and your budget.
As well as the information provided in this article we would suggest that you discuss the following points with your broker, advisor or insurance company before making your decision:
Which critical illnesses will your children be insured for?
Some children's critical illness insurance policies will cover a longer list of medical conditions than others. Life insurance companies vary in terms of what is classed as a claimable illness and there are usually definitions that must be met. The upgraded or enhanced covers will usually expand the list of medical conditions that are covered by the basic version of the policy where this is available. Vitality covers a very long list of illnesses but the payout is relative to the diagnosed condition, so less serious illnesses are paid a proportion of the full benefit.
Additional features that will cover your child
The peripheral services a life insurance company offers can add considerable value too. Some life insurance companies offer access to virtual GPs, counselling and a second medical opinion. These can be crucial at a time when parents want to be sure that their child is receiving the best treatment and diagnosis possible whilst managing a tough time.
Cost of children's critical illness cover
In order to compare the true cost of a children's critical illness insurance, you should try to look at the enhanced and upgraded costs where available, rather than the basic versions of the cover. Equally, you should consider which companies allow multiple claims.
It is also worth noting that companies that allow you to add and remove children's critical illness cover are making it fairer from a cost point of view. You only pay for it if you want and need it - also, you can remove it once your children reach an age when they no longer qualify for it.
If you are buying your term life insurance plan with your partner, do consider buying a policy each instead of a joint life insurance policy. This may not mean much in terms of extra cost but in some instances, it may double the child benefits available.
Guardian 1821 are the first to have made it possible to buy critical illness insurance for your child even if you're only buying life insurance for yourself. This may only cost a few pounds more to include and can add real value for families.
How to find the best children's life and illness insurance at the best rates.
Life insurance can be a complex area to navigate if you are looking to find the best family benefits at the lowest prices. Critical illness insurance is even more complex and comes with many additional features and definitions that can make one product better than the next within the same price range.
For these reasons, it is usually helpful and wise to speak with a specialist life insurance adviser* who can search the whole market with your specific needs in mind. An adviser will be able to recommend the best products based on how you want to protect your family and will keep your budget in mind whilst doing so.
Children's death and illness benefit explanations are buried amongst the technical summaries that go with the adult insurance policy and having someone on side to help explain them in plain language will help you to make your decisions. Understanding where you can sometimes spend just a pound or so more to take advantage of access to global medical treatment for example shows the difference that an adviser will make. Not all extra benefits are valuable to everyone so building a tailored solution is advantageous.
If you speak with an adviser via the link above and end up arranging your personal insurance, you'll even get up to £100 cashback just for being a Money to the Masses reader.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article - LifeSearch
