When it comes to life insurance, one of the most common reasons for buying a policy is to financially protect your children. The right coverage can replace your income, meet your kids’ basic needs until they are grown, and even provide for certain life events (like college tuition or a wedding).
If you have a child with special needs, however, the typical life insurance coverage might not cut it. There are certain considerations to keep in mind and questions to ask yourself, in order to protect your child for as long as is necessary.
Parents of Special Needs Children: Why Life Insurance is Necessary
Life insurance is a key financial protection for most parents. Whether your child is a newborn or teenager, the funds can provide for their basic needs and keep their lives on track, in the event of your death.
When you have a special needs child, however, life insurance becomes even more crucial. In addition to everyday living expenses, the proceeds from a life insurance policy can help pay for things like:
- Therapeutic services
- Medical copays and prescriptions
- Special equipment (wheelchairs, communication devices, etc.)
- Care from aides, nannies, or other helpers
- Respite for caregivers
- In-home and facility care
Funds may also be needed to pay for extended health insurance coverage for your child, especially if the coverage is currently provided through your workplace and would be lost after your death.
Depending on your child’s needs, they may require care for the rest of their life. In some cases, your child may require caregivers as they get older, the cost of which can add up quickly.
You may also want to consider the price of additional help around the home, if your spouse or other family members would be caring for your child on their own. This might include lawn care, housekeeping, laundry services, grocery delivery, child care, and the like.
Things to Consider When Buying Coverage With a Special Needs Child
When calculating how much life insurance coverage you need, the typical advice is to replace your income for a set number of years or until your children are grown. When you have a special needs child, though, the considerations evolve quite a bit.
Here are some important questions to ask yourself before buying life insurance. These can help you decide whether to buy a term or whole life policy, for instance, as well as how much coverage you need and how to name your beneficiaries.
Is Permanent Coverage Necessary?
Some parents can get away with buying term life (i.e., temporary) insurance coverage. These policies — which generally range in length from five to 30 years — can provide protection for certain milestones, like when your kids go to college or move away from home.
When it comes to parents of special needs children, though, the financial support may not end once their kids reach adulthood. If your child’s needs are lifelong, no matter what level of support they need as an adult, consider purchasing permanent coverage instead. A permanent policy, like whole or universal life, provides protection no matter when you pass away, so your child is always financially secure.
Will your child’s needs change over time?
Some conditions follow a predictable path, while others give parents little insight as to what their child’s future holds. If you have any idea as to what your child’s needs will be down the line, you may want to factor that into your life insurance coverage calculation.
For instance, if you know that your child may require in-home or resident facility services as they get older, consider the cost of that care over the rest of their lifetime. You may also want to factor in upgrades in equipment and medical devices that your child may need, such as new wheelchairs, upgraded visual aids, or special home accommodations.
Who will be responsible for my child’s care and managing their funds?
Depending on your child’s specific needs, they may not be able to manage their own care or finances, even as an adult. You’ll need to decide now who will be responsible for your child’s care, both now and in the future, as well as who will responsibly manage their life insurance proceeds to ensure that the money is distributed properly and doesn’t run out.
For many parents, this role automatically goes to the surviving parent. But in the event that both parents die, you should designate a backup, which could be a trusted family member. You can also designate one person as your child’s guardian and another as the financial manager, if desired.
Make sure that your wishes for your child’s care and management of funds are properly documented and/or recorded, and that you have a legal will in place.
Will life insurance proceeds impact government assistance?
Certain government assistance programs and funding, such as Social Security disability and Medicaid, can be integral to meeting your child’s needs, even as they reach adulthood. Not only can your child receive regular financial assistance through these programs, but they can also qualify for health insurance coverage that may otherwise be difficult or cost-prohibitive to obtain as they get older.
However, life insurance proceeds can potentially derail these benefits. To prevent a life insurance payout from disqualifying your child for certain government assistance programs, you may want to consider setting up a trust for your child.
The trust can be under your life insurance policy’s named beneficiary, rather than your child, which can help maintain their eligibility for certain public assistance options. You can then designate a trustee to manage and disburse the funds on your child’s behalf.
Being a parent means looking out for your children’s best interests, no matter what life holds. If you have a child with special needs, you may be even more concerned about providing for their care in your absence.
The right life insurance policy can help you protect your loved ones — special needs or not — with financial protection for years to come. If you do have a child with additional needs, though, be sure to ask yourself the questions above before choosing a policy.
Not sure which policy or coverage level is right for your loved ones? LeapLife is here to help. Our platform makes it quick and easy to get matched with A-rated (or higher) insurance carriers that can protect the important people in your life. Coverage is available for up to $5 million, with term policies as long as 40 years.