Q. I have recently observed at close hand the emotional and financial impact a seriously ill child has had on our friends. We are have 2 young children and my husband and I both work to support our family and pay the mortgage. Can we get insurance to protect the family in the event of one of our children falling ill and my husband or I having to cease work to care for a child?
A. The role of insurance is to maintain the financial “status quo” at a time of need. Coping with Illness is stressful enough without compounding the effects with financial pressures. In the time of a family health crisis, the last thing you should need to deal with is forced change as a consequence of financial circumstance. Insurance can provide a lump sum to discharge debt, pay for unexpected expenses and importantly replace income in the event of a health crisis.
The focus on insurance needs has typically been the consequences of the income earner or carer either dying or becoming incapacitated. However there has been growing recognition of the disruption and cost to a family of a child suffering from a prolonged illness. Whilst no parent wants to consider their child falling ill, it is important to recognise that serious illness poses a real risk. Of the 558,000 children admitted to Australian hospitals in 2007-8, 200,000 were admitted with critical health conditions.
As parents we will do whatever it takes to support a child back to health. Whilst none of us wish to think of our child facing serious illness or accident, the consequences to the finances of the family can be catastrophic.
The experience for parents of children with serious illness is typically the principal carer will cease work and care for the child fulltime. The length of time out of the workforce will be unknown but it could be more than 2 years for a full recovery.
In addition to meeting what may be considerable medical costs, the financial consequences of relying on a single income could impact the ability to service the home mortgage. Beyond this, the loss of income could impact goals such as renovating or upgrading a family home. It could mean the deferral or cancellation of Private school education for the sick child or their siblings. Not to mention goals such as family holidays.
Insurance cover for children is typically provided as an additional benefit on an adult life insurance policy. The benefit is usually an agreed lump sum benefit on diagnosis of a specific condition, a traumatic accident or death. Other options include a monthly income benefit if a carer ceases work to care for a child.
Some Health funds offer stand-alone child policies usually providing a lump sum in the event of an accident.
Some insurers provide an option for guaranteed insurability so that a child who may be otherwise uninsurable due to pre-existing health conditions can secure cover at age 18 and beyond.
Assess the financial impact relying on a single wage would have on your family finances. If your primary expense is your mortgage consider how much it would need to be reduced for the debt servicing to be manageable on one income. Review your existing insurance arrangements to determine if child insurance cover is available and what the costs would be. Above all seek advice on an appropriate solutions based on your needs.