Parents of children with special needs face not only emotional hardships, but also financial challenges. The functional needs of these children can warrant lifelong support and assistance, so adequate resources are required. While no one wants to think about losing a child, life insurance for your special needs child could be beneficial if the unthinkable happens. However, purchasing life insurance for children is not as commonplace as it is for adults, so the decision requires careful thought and planning.
Life insurance for your child with special needs
In general, life insurance is intended to replace lost income or to settle debts after death, while at the same time providing financial support to the beneficiaries of the insured. Since children are not employed, it is less common for them to take out life insurance than for adults. But if you have a child with special needs, life insurance can be a helpful tool.
Pay for funeral expenses
Funerals can get expensive. Nobody wants to think about their child’s funeral expenses, but planning ahead can save you stress in the worst case scenario. Life insurances pay a death benefit after the death of the insured person. This can be of great benefit to parents as the death benefit could cover funeral expenses and also provide time for mourning without having to worry about money.
Protect the child’s insurability
When a child grows up with special needs, their medical problems can make it difficult or impossible to get life insurance. If a policy is found it can get expensive. Obtaining permanent life insurance for your child at a young age, if any, can help ensure that they can remain insured into adulthood. In fact, newborns are automatically eligible for insurance up to a certain age.
Life insurance for parents
Life insurance for children with special needs may be less common than for adults, but coverage options are available. You can take out permanent life insurance that will cover your child’s entire life, provided the premiums are paid. You could also consider making your child a beneficiary in your own policy, but insurance companies may have rules about listing a minor as a beneficiary (for example, you may need to establish a trust). And while the cost of life insurance for children is generally lower than it is for adults, children with medical complications may not.
If you can’t get a policy for your child, a child driver might be a good option. This is an addition to your own life insurance where you can include your child at an additional cost. The amount of coverage varies, but is usually relatively low, often no more than $ 25,000. Some companies also offer you the option of converting the driver to a permanent policy when it expires. If your current life insurance policy doesn’t offer a child driver, you might consider switching business to an insurance company that does offer this option.
Trust for special needs
If your adult child is unable to manage their finances on their own, a special needs foundation can be a good option. This is also known as supplementary needs coverage and is intended for estate and policyholders who cannot provide for their own funds. You will likely need to work with an attorney to draft the trust and provide specifications on how the money will be used. You must also appoint a trustee and co-trustee to manage the funds. It is not strictly necessary to set up the trust before getting a life insurance quote and purchasing a policy, as you can change the beneficiaries at any time.
How much life insurance do I need for my disabled child?
Which life insurance you need depends on several factors. You may want to think about possible funeral expenses, funds to live on during your grief, and possible financial gifts that you might want to leave someone who is important in your child’s life. If you are unsure of how much coverage to buy, a life insurance broker should help you with the calculations.
frequently asked Questions
Can I make my child with special needs my life insurance beneficiary?
Maybe. Some states and insurance companies have laws and regulations regarding minors as beneficiaries and do not allow them to do so, but there are ways you can leave your financial gift to a child. You can designate your child’s legal representative as a beneficiary or work with an attorney to build trust.
What can I use a death grant for?
There are no restrictions on using a death benefit. If you take out life insurance for your child and they die, you will receive the death benefit from the policy. You can use the money for funeral expenses, bills, debts, or your daily expenses.
What is a cash value policy?
Permanent life insurance policies that cover all life and universal life have a present value component. The cash value of these policies grows with interest and offers subsistence benefits or aspects of life insurance that can be used during the insured’s lifetime. You may be able to borrow against your cash value in the form of a loan. You may even be able to withdraw the cash value without paying it back, although this will lower the death benefit.