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Understanding Children’s Life Insurance in Australia

Russell Cain Fact Checked Updated: 04 August 2023

Child life insurance policies typically offer a lump sum payout if your child passes away or experiences a critical illness, as specified in your insurer’s Product Disclosure Statement (PDS). With child cover, you can ensure that your children are financially protected during difficult times, allowing you to either care for them at home or access the best available medical treatments. Certain insurers in Australia even provide premium-free child cover.

It’s important to note that child life insurance policies typically have age restrictions and coverage limits. It’s crucial to review the PDS carefully before purchasing a policy to ensure it meets your family’s needs. Additionally, it’s essential to consider the long-term financial implications of the policy, including premiums and potential payout amounts. It may be helpful to consult with a financial advisor to determine if child life insurance is the right choice for your family.

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What is life insurance for children?

Life insurance for children is available through select insurers in Australia, some offering premium free child cover when attached to an adult’s stand-alone life insurance, trauma, or income protection policy. Should your child fall victim to a traumatic event, your child’s insurance policy can provide you with a lump sum benefit to help pay for medical expenses, or funeral, in the event of their death.

Do children need life insurance?

Children don’t typically need life insurance. Life insurance is intended to pay off debts and help your loved ones maintain their current lifestyle. Most children don’t have mortgage payments, and most families aren’t relying on their children to contribute to the household income.

However, insurance for children often provides cover for a number of traumatic events such as blindness, cardiomyopathy, paraplegia, malignant cancer and severe burns as well as death and terminal illness.

What does children’s insurance cover?

Select insurers offering premium free children’s insurance will generally pay you a tax-free lump sum of $10,000 to $25,000. If you decide to pay extra to receive more cover, Children’s Insurance can pay you a tax-free lump sum up to $250,000 if your child:

Make sure to check the insurer’s PDS to see precisely what your child is covered for.

Insurance coverage for children will generally pay a lump sum for traumatic events and illnesses, including:

How does life cover for children work?

  1. Buy a term life insurance policy covering yourself or your spouse.
  2. Add on a child rider (an optional extra policy feature) that extends a small cover amount to the life of your child.

Standalone child’s cover is not widely available in Australia.

The benefit amount

Depending on the insurer, you can generally apply for a minimum of $10,000 up to a maximum of $250,000 sum insured.

Select insurers are now providing a child critical illness benefit with income protection policies. This provides up to three times your monthly benefit up to a maximum of $25,000 if your child suffers from a critical illness that is listed in the PDS.

Covering more than one child

Child insurance generally allows multiple children to be covered under one policy, with some insurers allowing up to 10 children to be covered.

Most policies do not limit the number of children you can add to your policy. However, each child must have the same sum insured.

Insurance coverage for children under 18

Depending on the insurer, you can usually apply for child cover if your child is between the ages of 2 and 17 (inclusive).

Insurance for adult children over 18

Before your child turns 18 most life insurance companies will offer your kids a continuation option on their life with trauma policy; usually without medical evidence being required.

Children’s accident insurance

Children’s accident insurance generally provides a benefit in the event of accidental death or injury resulting in major head trauma, encephalitis, meningitis, blindness, deafness, paralysis, and the total and permanent loss of use of two limbs.

Generally, the lump sum benefit will only be paid if immediate impairment or permanent disability occurred within 6 months of the accident.

Can I cover my children under my life insurance policy?

Yes, generally life insurance cover for children are available as an additional benefit in most life insurance policies, providing cover to your kids up to a specific age. However, before paying for such a benefit, you might to first invest your finances in:

  • Building an adequate emergency savings fund.
  • Making sure mom and dad have sufficient life insurance coverage, TPD insurance and income protection.
  • Saving for the children’s college tuition.
  • Making sure your retirement savings are on track.

Purchasing children’s insurance vs not having life cover for your kids

Life cover for kids usually triggers a debate. Advocates believe life insurance for children is a great financial tool within their larger insurance portfolio and might assist financially should their child become critically ill.

In contracts, critics assert that such a purchase is a waste of money for most families because term life insurance policies do not guarantee that the child can maintain their life cover when becoming an adult.

For child coverAgainst buying insurance for children
  • Pays for costly specialist medical treatment.
  • Pay for other bills such as your mortgage, school fees, or child care if you have any other children.
  • Provides financing for grief counselling for family members.
  • Safety net if parents need to take time off work to care for children.
  • If your child developed a medical problem early in life, they might have trouble qualifying for affordable life insurance as an adult.
  • Fund home or car modifications.
  • Help ensure your child is as comfortable as can be.
  • Chance of child unexpectedly passing away or becoming critically ill is statistically very low, so might be wasting money.
  • In many cases, the amount of coverage is too small to provide adequate protection later in life.

Best child life insurance plans in Australia

Many life insurance companies in Australia offer insurance options for children, including AMP, AIA, BT, CommInsure and TAL.

Before buying life insurance for your child take a step back and look at your entire financial picture. Does it make financial sense to purchase life insurance for your children? Talk to your broker and discuss your options.

After determining your needs, compare Australia’s top child cover policies to ensure your child receives the best care available should the worst happen.

Frequently Asked Questions and Answers

  • Why would I consider getting life insurance for my child?

    While it is emotionally difficult to think about, children’s life insurance can help parents or guardians cover the expenses associated with a child’s untimely passing. Additionally, some policies also come with the option to build cash value over time, which can be used for future expenses like education or buying a home.
  • How much coverage do I need for my child’s life insurance policy?

    The amount of coverage needed depends on individual circumstances and financial goals. Consider factors such as funeral expenses, outstanding debts, and future financial needs when determining the coverage amount.
  • What happens to the policy when my child reaches adulthood?

    Some children’s life insurance policies may allow for conversion to a different type of policy (e.g., whole life to a permanent policy) once the child reaches a certain age, often around 18 or 21. Alternatively, the policy may continue as is, providing lifelong coverage.
  • Can I include multiple children under one policy?

    Some insurance providers offer family plans that allow parents or guardians to cover multiple children under a single policy, which may be more cost-effective than purchasing separate policies for each child.
  • How do I choose the right insurance provider for my child’s policy?

    When selecting an insurance provider, consider factors like the company’s reputation, financial stability, policy features, customer service, and overall cost. It’s essential to compare quotes from multiple insurers to find the best coverage for your child’s needs.

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