Insurance and your kids

Insurance and your children

Let’s kick things off with an outdated reference, it’s very unlikely you’re reliant on your kid’s income unless they are Macaulay Culkin or the Olsen Twins. So generally, when asked if someone needs life insurance on their kids the answer is no, and 17 is generally the minimum age of acceptance.

A serious medical event could, however, leave your household financially vulnerable. So here I’ll look at what private health insurance can do for your kids, and what we have done on our journey as a new family. You may also already have some cover for your kids available on your current risk policies that you need to be aware of.

As always, I’ll be discussing scenarios involving serious medical events and premature death of a family member. It’s never a nice topic to think about and some the information can come across quite matter of fact at times, but it’s my role as an adviser to get clients thinking about their financial plan and enable them to protect their family and reach their financial goals. No one wants to be forced into selling the family home to fund treatments for critical illnesses like cancer, because the treatment they desperately need for themselves or their loved ones is not subsidised by PHARMAC.

The New Zealand public health system is damn good when it comes to emergency services. If you need urgent and life-threatening medical attention, our hospitals and their incredible staff are there for you 24-7.

With non-urgent care, however, it’s becoming increasingly more difficult to get diagnostics and treatment with long waiting lists which result in poor outcomes for those left untreated. ACC, the Accident Compensation Corporation, can give you access to the private medical system, but for accidents only. Too many Kiwis don’t understand that ACC will not cover you for everything. Cancer, stroke, neurological issues/disease to name a few, will leave you struggling to pay out of pocket for the treatment (and diagnostics) that you desperately need, or face long wait lists in the public health system.

With almost all insurers you can add your child to your own Health Insurance plan for a fraction of the cost and they can stay on those discounted child rates until they reach adulthood, at which point they can transfer onto their own plan. With Accuro, one of the providers I started working with recently, kids cover goes all the way to 25 years old which I think is a great initiative as those at 25 are far more likely to continue the cover then cancel it.

Why is continuous cover important? That health insurance catch phrase “pre-existing conditions”. If you cancel a policy and try to pick it up years later you will have to start a new application, meaning you may end up with a number of exclusions to your cover. This is especially important if you are a sporty family with sporty kids. Speaking from experience, years of being a mediocre rugby player would have left me with a list of exclusions that read like a Tolkien novel had I not been included on my parents cover and continued it on into adulthood.

For us and our new little family we added our daughter to our existing policy from day dot. Providers have different terms around congenital conditions, some will not cover them or may say they will cover them if they have had no symptoms in the first “x” number of days etc. so don’t be afraid to get into the weeds and read through the finer points of your health cover.

Affordability is always key for insurance, as any policies you put in place should save you from financial strife not put you in strife because of premium costs. Working out what you can afford and discussing this with an adviser is crucial, and one of the best savings tips I can give you on any insurance products is having a healthy emergency fund. Insurance is a function of personal financing and planning; it’s your defensive plan to match your offensive plan (your goals). If you have anywhere from 3-6 months of expenses saved up this means you can take a higher excess on your cover because you can “self-insure” up to a certain amount.

Medical expenses may not be the only financial loss you could suffer with kids, you may incur costs for travel and accommodation as well as having to take time off work (especially if you are self-employed or a contractor). You may have benefits relating to your kids available on the cover you already have so it’s important to check and know what you’re covered for. If you have a Trauma or Critical Illness policy with one of top providers, it’s likely there are benefits within that which relate to your children. You may need to have them named on the policy however, so talk to your adviser or provider about this. In general, you could get 50% of the sum insured on your Trauma policy which can help with any treatment and recovery related costs, or even allow you to take time off work to be with your loved ones when they need you most (this is critical if you are self-employed or a contractor).

So much of this always comes down to planning for you and your family. If you’re not going to take insurance against risk then what is your plan? If you can figure out a way to self-insure, or as suggested above partially self-insure (higher excess) that’s great! You are one of the far too few Kiwis who have planned for a rainy day.