Life Insurance Coverage for Special Needs


Mother with her childrenIf you have a disabled family member who will likely depend on you for daily care and support for the rest of your life, it is important to plan for the day when you may not be here for him or her.

Hopefully you have other family members who can step in to help provide for the needs of the disabled person after you are gone. If not, a life insurance policy can offer protection and the financial resources needed to see that your loved one receives the care he or she deserves.

Permanent needs call for permanent insurance

For many people in this situation, the need would be classified as permanent, as opposed to temporary. So if you are considering life insurance to help provide for your family member with long-term special needs, it is important to look for a policy that offers a death benefit regardless of your age at the time of death. This may rule out term insurance. Look into whole life policies, such as ordinary, universal, or variable life insurance as the primary source of coverage.

What to consider if you share responsibilities with a spouse or partner

It's very important that you and your spouse carry enough life insurance coverage if you both share the responsibility of caring for a person with special needs.

One way to reduce the total cost of life insurance is by purchasing a survivorship or "second to die" policy. With this arrangement, instead of owning two separate policies, you will have one policy that insures both of you. Since the policy pays a death benefit only after both of you pass away, rather than just one of you, the risk to the insurer is reduced. Therefore, the coverage for both of you costs less than you would pay for two separate policies.

Take care when naming a beneficiary

The beneficiary designation is very important when planning for the well-being of someone with special needs. If they are unable to manage their own finances, do not list them as the beneficiary.

Consider these alternatives to naming your special needs family member as beneficiary:

  • Name your spouse, partner or other family member who will take on the responsibility of the ongoing care as beneficiary.1
  • Establish a trust for your loved one's benefit and name the trust as the beneficiary.

Caring for a family member with special needs takes special planning. With the right life insurance policy, you can feel better knowing that their needs can be met, even after you are gone.

1Not applicable for a survivorship policy since the spouse (or partner, if co-insured) will also have passed away in order for death proceeds to be paid out.

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