A tough deal on insurance: your mother should know

Tom Tickell looks at the troubles faced by full-time mums in taking out cover for the risk of illness

A good woman - Mother's Day or no - is worth more than rubies, says the Bible, and that view was reinforced last week by the insurer Legal & General. It calculates that mums with young families do unpaid work at home that, if it had to be paid for, would cost pounds 313 a week or pounds 16,250 a year.

Legal & General, of course, has its own axe to grind. Only one woman in 50 has her life insured, aside from cover for a mortgage, and that additional life insurance is only worth pounds 11,000 on average.

So far, so bad. But any woman in her late 20s is far more likely to get a long-term incapacitating illness than to die before she is 60. Again this is a risk that insurers are generally happy to take on - for a price. But if you are at home looking after children full time and therefore, arguably, have most need to worry, the irony is that some insurers will not take on the risk at all and others will restrict the cover they offer.

So how much would it cost to insure a young, or not so young, mum? A woman of 25 who just wants her family to get a fixed pounds 100,000 if she dies within 15 years has to pay around pounds 17 a month for the cover, as a non- smoker. By that time, today's dependent two- and five-year- olds will be at the very least a semi-independent 17 and 20. A sum of pounds 17 may not sound much for the financial peace of mind, and it's less than the same cover for a man would cost because women tend to live longer.

Coping with the risk of illness is more difficult, however. Insurers offer policies to cover the risk that work well if you have a full-time job, but not if you are a full-time mother.

The oddly named permanent health insurance gives you a regular monthly income if you fall so sick you cannot work. It continues until you recover, or reach retirement age. Schemes normally rely on providing you with 50 per cent of your previous income tax-free, and that is the problem; anyone at home with children all the time will rarely have much income to replace.

Some insurers - such as Cornhill, Friends Provident and Unum - will not take on "homemaker" women at all. Others - including Abbey Life, Legal & General and Norwich Union - will accept them, but with tight limits on potential payouts. PPP Lifetime, for instance, will insure women who are at home full time, looking after children under 13, for up to pounds 1,000 a month. Once the children are

teenagers, the limit falls to pounds 650.

How much will the promise of guaranteed income in long-term illness cost? That depends on a host of factors including age, occupation and the time lag you are prepared to accept between the onset of illness and the first cheque.

Assume you go for a three-month wait. A woman of 25 at home full time has to pay pounds 19.70 a month to Norwich Union for its top potential benefit of pounds 10,000 a year. Men pay less than half as much. They may die earlier on average, but are much less likely to suffer from long-term sickness.

"People at home can be prone to depression and the illness ME," says independent financial adviser John Joseph. "Even if insurers cover them, they can be wary of claims because symptoms are so vague."

What are called critical illness policies work differently by providing a lump sum, once you have been diagnosed as having any one of 30 or more listed illnesses within a period of perhaps 10 or 15 years. The policies cover all the obvious major problems such as heart attacks, strokes and cancer, but even if you are 25 and want a 15-year plan, it will add another pounds 20 to your monthly bills.

If you have limited funds, basic life insurance is what matters most. But paying for permanent health cover or critical illness insurance might be worth considering. Of course the hope is you will never need to claim on any policy. But if disaster did strike, a financial shelter could be an enormous psychological as well as financial benefit.