The issue of taking out insurance on children is a sensitive one. There are concerns that parents may harm their children to claim insurance. An aspect of this was recently highlighted with the deduction of funeral cover premiums from child support grants. There are calls for the deduction of funeral cover from the grants to be stopped.
However, to mitigate the potential for harm to a child there are limitations to the amount of cover that can be taken out on a child’s life. Henk Meintjies, head of risk product management at Liberty, explained that the long-term insurance act limits the amount of life cover for children based on age. The act does not mention any of form of long-term cover specifically relating to children.
The life cover limits are:
- 0-6 years old – max of R10 000
- 6-14 years old – max of R30 000
Insurance products available for children
While often thought of as a standalone product, medical aid cover is one form of insurance where parents can include their children. However, as this aims to cover medical expenses, it is not a form of insuring that actual child.
Meintjies pointed out that there are three Liberty products available for parents to take out on their children. These are: child living lifestyle, living lifestyle dependant protector and funeral cover. There is also the child illness protector, which is a free ancillary benefit on absolute income protector product.
- Child living lifestyle and living lifestyle dependant protector
“Liberty’s Child Living Lifestyle benefit has been designed specifically for children and provides you with some financial relief in the unfortunate circumstance that your child is diagnosed with one of 12 child critical illness. This benefit is taken in combination with either our Living Lifestyle or a Living Lifestyle Plus benefit to provide a comprehensive lifestyle protection solution for you and your dependants,” explained Liberty.
- Funeral cover
There are a range of funeral cover products from different insurance providers that allow the main member to include their immediate and/or extended family onto the plan as well. As such, you would be able to include your children on such a policy.
In addition to the above, Discovery offers the global education protector product, which “provides financing for your children’s education in the event of your death, disability or severe illness.” Essentially this is a product taken out by the parents, but the benefits are solely for the sake of the child.
In the global education protector policy document it states: “Your children’s education costs will continue to be covered until they receive their first tertiary qualification, or until they turn 24. If you reach the age of 65 without ever having made a claim, your policy will convert to provide you with life cover, disability cover, or severe illness cover, depending on the claim events you have selected.”
The pay-outs are as follows, based on the level of education:
- Pre-school - R60 000
- Primary school - R595 000
- Secondary school - R515 000
- Tertiary institution (local) - R220 000
- Tertiary institution (international) - R2 400 000
Future insurability of childhood diagnoses
There are a number of conditions that will present themselves during childhood or at the onset of puberty, which can be lifelong conditions, such as diabetes. Chronic conditions such as this can be excluded from insurance policies, so any claim that would be related to the condition would not be paid out.
When asked how the childhood diagnosis of a lifelong condition can affect insurability, Meintjies said: “This depends on the nature of the condition diagnosed and the lasting impact of the condition on the child’s health. It is possible in severe cases, that once the child becomes an adult and applies for cover that certain conditions relating to that diagnosed are excluded or a loading may apply to their premiums paid.”
Meintjies added that Liberty does not currently have a benefit that allows parents to take out a policy on their children to pre-empt the childhood diagnosis of a condition that could affect the children’s insurability in the future.