Raising kids is an expensive business at the best of times, but imagine the burden if your child suffered an illness or injury that required expensive medical treatment.

It’s not something we like to think about, but many families across Australia are faced with exactly this predicament every year. Aside from the emotional stress of a child’s illness or injury, parents are often hit with financial stress resulting from out-of-pocket medical expenses and travel costs – particularly if they’re from remote areas or need to travel overseas for treatment.

Child life insurance is a relatively new type of insurance that’s designed to ease the financial pressure on families. It can provide you with a lump sum payment should your child die, get diagnosed with a terminal illness, or suffer a specified medical condition or procedure. Each insurance company will maintain their own list of illnesses and injuries, but common examples include brain damage, cancer, paralysis, burns, blindness and deafness.

How much child life insurance cover you’ll need depends on a range of factors including your current levels of debt, income and savings. If you and your partner both work, or if you’re a single parent, you may need to allow enough cover to support the family financially if you’re unable to work for an extended period.

How can child life insurance help?

The child life insurance benefit is paid upon diagnosis or occurrence of the illness or injury. Parents will often use the proceeds of a payout to cover medical treatment or rehabilitation, replace lost income if they need to take time off work, or even take the family on a holiday to relieve the pressure of what is often a very stressful time.

Child life insurance is often packaged as an optional benefit within an adult’s life insurance policy. The benefits generally expire once the child turns 21, but many policies include a continuation option. This means that you can convert the child life insurance policy to an adult policy once the child reaches a certain age (usually 18).