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4 Life Insurance Considerations for Parents of Children With Disabilities

October 08, 20242 min read

Life insurance is a crucial way parents can help protect their children's financial future. If a parent passes away, a life insurance policy can provide a safety net, ensuring their child's needs are met now and in the future.

For parents of children with disabilities, life insurance can be even more critical. Children with disabilities may have higher medical and care costs and might need lifelong support.

Here are four crucial life insurance tips for parents with special needs children.

  1. Set Up a Special Needs Trust

When you get life insurance, you choose a beneficiary—the person or group receiving the money if you pass away. While you might want to name your child as the beneficiary, there are some excellent reasons not to, especially if they have special needs:

- Children can only receive life insurance money once they turn 18.

- If your child gets government benefits like Supplemental Security Income (SSI) or Medicaid, receiving life insurance money might stop them from getting these benefits since they can't have more than $2,000 in assets.

- If your child can't manage their own money due to their disability, they might not be able to handle life insurance proceeds.

A better option is setting up a special needs trust. This trust can provide money to your child when needed without stopping them from receiving government aid.

  1. Think About Your Child's Future Needs

Life insurance can give you peace of mind, knowing your child's future will be secure even when you're no longer around. When deciding how much life insurance to get, consider all the lifelong expenses your child might face, such as:

- Medical bills and insurance

- Therapy (physical, occupational, etc.)

- Transportation

- Education

- Service animals

- Adaptive equipment

- Caregivers

- Housing

  1. Look Into Permanent Life Insurance

If your child will need care for the rest of their life, a permanent life insurance policy might be a better fit than a term policy.

Term life insurance only covers a set period, while permanent policies like Whole Life or Universal Life cover you for your entire life as long as you keep paying premiums. These policies can also build up cash value over time, which can be helpful for future financial needs.

  1. Get Expert Help

Planning for your child's future can be complex, but you don't have to do it alone. It's a good idea to work with experts in finance and disability care. Some professionals you might want to talk to include:

- A financial planner

- An estate planning attorney

- A disability rights lawyer

- A social worker

- An insurance agent

- A healthcare professional

Each expert can offer guidance to help you make the best decisions for your child's future.

By carefully planning and making the right choices with your life insurance, you can help ensure your special needs child is cared for long after you're gone.

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