Caring for a child with special needs can be overwhelming but also financially challenging. Caring for these children may mean you need to create a plan for lifelong support instead of when they turn 18. While this can be financially draining, caring for your children with disability needs after you pass away is important. In cases like this, life insurance for parents of special needs children is important. Naturally, parents want to ensure their children have all they need when they are no longer there to provide.
For this reason, they take life insurance policies to provide financial support for their children in the future. However, the need for a financial plan is more for parents of special needs children. This is so they can pay off medical bills, college fees, as well as every other need.
How Much Life Insurance Do Parents Of Special Needs Children Need?
How much life insurance you need depends on several factors like personal decisions, age, financial stability, and lifestyle. For most people, the need for life insurance lessens as their children grow older and can do things on their own. But this may be different for parents of children with disabilities.
The first step is to determine your child’s future needs and expenses as much as possible. Doing this can help you work with professionals who are used to the long-term needs of children with special needs. These professionals include a disability rights lawyer, a healthcare professional, and a social worker.
Best Life Insurance Policy For Parents Of Special Needs Children
The best type of life insurance policy for parents of special needs depends on their special situations, budget, and coverage needs. Generally, there are two main types of life insurance policies: term life and whole life insurance. Term life insurance policies last only for a specific number of years and offer you no financial benefit after the policy ends and you are still alive.
Whole or permanent life insurance policies last throughout the lifetime of the policyholder. And will stay active as long as premiums are paid. If you predict that your special needs child will grow out of the need for care in the future, term life insurance may be a good option.
If your child’s special needs will remain throughout their life, a whole life of permanent life insurance may be the best option. While whole life insurance is more expensive. Thus, it comes with several benefits, such as cash value that can be withdrawn. Or borrowed even while you are alive.
Can My Special Needs Child Be My Life Insurance Beneficiary?
If your special needs child is collecting governmental assistance like Medicaid and Supplemental Security Income. It may not be a good idea to list them directly as your life insurance policy beneficiary. It may lead to disqualification from receiving this assistance since they are required to have nothing more than $2,000 in their assets.
The best thing to do is to create a special needs trust for your child. This option directs money to your child’s needs and mitigates the tax your child might have if they are to directly receive the money from your will.
What is a Special Needs Trust?
A special needs trust is also referred to as a supplemental needs trust. It allows parents to support their special needs children financially without getting them disqualified for SSI or Medicaid. This trust consists of three people, which are the person who funds the benefit, the receiver, and the manager or trustee.
The manager or trustee must be a person who is handling the money in the trust and a person you can fully trust because they hold responsibility for your child’s financial needs after you pass away.
Can Life Insurance Provide Enough Financial Support for My Special Needs Child?
This depends on the kind of your child’s special needs and the type of insurance policy you buy. Life insurance may be enough to financially support your child after you pass away if the right one is purchased. Also, evaluating your child’s long-term expenses and selecting the right policy with enough coverage to cover those expenses. This may help you evaluate how completely life insurance would support your child financially.
Can I Assign Most of My Life Insurance Payouts to My Special Needs Child?
Yes, you will be given the option to set one or more beneficiaries when you buy a life insurance policy. Through this process, you can assign more or less of your policy’s death benefit to your beneficiary by stating a specific percentage of benefits.