New Zealand parents urged to consider taking out insurance on their kids
Mum-of-three Hannah Blake is hoping she will never have to make a claim on one of her insurance policies in particular.
When she took out life and trauma cover for herself and her husband with Sovereign, trauma cover for the kids came too.
Adults generally take out life and trauma policies to make sure their families can stay afloat financially if they are struck by a serious illness and unable to work.
Kids don't have much of an income. They don't have to worry about paying a mortgage. They don't have any dependents. Why then, would you bother with a personal insurance policy for a child?
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Parents are being told they should consider the potential financial implications of one of their children ending up in hospital for any length of time and how insurance might be able to help.
It is illegal to offer life insurance policies for children because of the potential risk of someone taking out cover and then killing the child to claim on it.
The Life Insurance Act means all life insurers can offer when a child under 10 dies is a refund of premiums paid, plus interest.
Asteron Life, Fidelity Life, OnePath, Partners Life and Sovereign offer a funeral benefit of up to $10,000 in some cases.
But all insurers offer trauma policies, which pay out if a child suffers serious illness.
Partners Life has launched a new product that pays the most in the market - $500,000 in cases of terminal illness.
It also offers trauma cover, which includes insurance for illnesses that are not terminal, up to $450,000.
Some insurers offer built-in benefits for children on adult policies, or allow parents to add on extra trauma cover at a nominal cost.
Partners Life this week launched its Terminal Illness Cover product, which pays out if someone has a limited time to live. It is not just for kids but because it does not pay out on death, it can be used for children, too.
Steve Wright, Partners Life general manager of product, said: "For the cost of a cheap flat white per month, parents can get more than $250,000 worth of Partners Life Terminal Illness Cover on a child, giving them significant cash if the unthinkable were to happen. I can't imagine any sensible reason why anyone would not do this."
Wright said he had already bought as much trauma cover for his kids as he could. "If they ended up getting kicked in the head at a petting zoo and will never grow up to be an adult anyone will employ, my wife is never going back to work ... that would cost millions."
He said many New Zealanders did not understand the need for kids' insurance yet and it was something more insurance advisers should start talking about.
"It's fine having your medical expenses covered but what about the other costs?"
Insurance adviser Bruce Cortesi has been distributing a Youth Protection Plan for some time, which covers teenagers from 14 up.
He said he had decided there was a need for the product when a young person he knew was diagnosed with leukemia and had to travel back and forth between Waikato and Auckland for treatment over a long period of time.
"One parent was out of work, under stress, and there was the cost of travelling to and from Auckland. The community put money in but I realised the real need for this product."
Giving children insurance at a young age can also help them get cover when they are older.
Cortesi said a 15-year-old could take out $100,000 of cover with level guaranteed premiums - so they would still be paying the same amount when they were 60, a potentially huge saving.
Some insurers also offer parents the chance to insure their kids' future insurability - paying a small additional premium so they are guaranteed to get cover as an adult.
Industry commentator Russell Hutchinson said it made sense to take out some trauma cover for children. He said the public health system was good at treating children for medical issues but the effect on parents could be substantial.
"It usually requires a parent to be home. The effect and disruption sets a child back so much, if you're covered for $20,000, even a parent working part-time earns at least $20,000 - that's only one year off part-time work and their treatment could take two or three years."
Blake said she would have wanted to pay for cover if it had not been automatically included.
"It's so you know you have the funds to care for your children properly in any circumstances."