Life Insurance to Protect Your Child with Special Needs

A dad and his daughter play the guitar after he secured a life insurance policy for his special needs daughter

If you have a child or family member with special needs, you understand how much it can cost to provide them with adequate care. Not only do you have day-to-day planning, but also long-term care and financial planning. A life insurance policy can help ensure that your child with special needs is taken care of if you were no longer able to provide for them. 

Types of Life Insurance to Protect Your Special Needs Child

Term life insurance is a popular option for parents of children with disabilities as it’s typically more affordable and provides coverage for only as long as it’s needed. Permanent life insurance is often more expensive, but it may make more sense if you need financial support into your child’s adulthood. If you already have a life insurance policy, you can add a child rider to your existing policy, which generally covers all children—current and future—in your household for an additional small premium. 

Considerations for Naming Your Child as a Beneficiary

Life insurance companies won’t pay out the death benefit to a beneficiary under the age of 18 (sometimes 21 depending on your state), so if you name your child as the beneficiary, you’ll also need to name a custodian of the funds. 

You’ll also have to consider your child’s eligibility for government benefits and assistance. If your child has assets more than $2,000, they would be disqualified from many federal and state assistance programs such as Medicaid and Social Security. 

A special needs trust, also known as a supplemental needs trust, is a trust designed specifically for life insurance beneficiaries who are unable to handle their own finances and care. This trust ensures that your beneficiary can still qualify for government assistance. When you create your trust, you can leave specific instructions for how the funds should be used. 

How-To Calculate Care Costs for Your Child

You’ll want to start thinking about your child’s ongoing needs, including expenses such as medications, therapy, transportation and education, to estimate how much money is needed to meet those expenses. Then you can estimate your child’s anticipated lifetime, as living and transportation expenses can add up over a long period of time. For someone with a disability, healthcare can cost three to seven times more than for someone without.1 Then, you’ll subtract any government assistance programs that your child is eligible for that help cover medical costs.

Why Buy Life Insurance for Your Special Needs Child

Life insurance for children can give you a financial cushion during your time of grief by providing money for funeral expenses and helping you keep up with bills. Some conditions can make it expensive or even impossible to purchase life insurance, but by purchasing a life insurance policy for your child with special needs, you guarantee their insurability, allowing them to always have at least a small amount of life insurance coverage. 

SelectQuote Can Help You Find Life Insurance to Protect Your Loved One with Special Needs

Figuring out what life insurance is right for you can seem complicated, but that’s what we’re here for. At SelectQuote, we have the answers you need to make the right decisions for you and your family.

1 https://pubmed.ncbi.nlm.nih.gov/29166812/

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