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4 Life Insurance Considerations for Parents of Children With Disabilities

Many parents purchase life insurance because they want to help protect the financial future of their children. In the event a parent passes away, life insurance can create a safety net for a child, ensuring their needs are taken care of now and in the future.

Life insurance is important for all parents to consider, but the need can be even greater for parents of children with disabilities. That’s because children with disabilities often require higher medical and care costs, and many need lifelong support rather than just 18 years.

Check out these four life insurance considerations you need to make if you’re a parent of a special needs child.

1. Set Up a Special Needs Trust

You may already know that a beneficiary is the person, people or entity that you designate to receive the proceeds of your life insurance policy.

Although you want your special needs child to receive the benefits of your life insurance policy, there are a few important reasons why it may be best to avoid naming your child as the beneficiary of your life insurance policy:

  • Children cannot receive life insurance benefits until they turn 18.
  • If your child receives governmental assistance such as Supplemental Security Income (SSI) or Medicaid, a life insurance benefit may disqualify them from receiving assistance as they can’t have more than $2,000 in assets.
  • If there’s a chance your special needs child will be incapacitated—or not in control of their own decisions when you pass away—they may be ineligible to receive the proceeds of your life insurance policy.

Rather than naming your special needs child as beneficiary, a better option is to set up a special needs trust, also known as a supplemental needs trust. This type of trust will provide money to your child as needed while mitigating tax concerns and not disqualifying them from SSI or Medicaid.

2. Reflect on Your Child’s Future Needs and Expenses

It’s very difficult to think about not being here to take care of our children someday—especially when your child will need lifelong care. But life insurance can help give you peace of mind that your child’s future is secure.

Understanding your child’s potential lifelong needs can help you determine how much life insurance you need. Some possible expenses to consider include:

  • Medical care and insurance costs
  • Physical or occupational therapy
  • Transportation
  • Education
  • Service animal
  • Adaptive equipment
  • Caregivers
  • Housing

3. Consider Permanent Life Insurance

If your special needs child will have lifelong disabilities, then a permanent life insurance policy like universal life insurance or whole life insurance may be a good choice.

Rather than term life insurance, which only provides coverage for a set period of time, permanent life insurance provides a death benefit no matter when you die (as long as you pay your premiums). These policies can also accumulate cash value that grows over time, accumulating through your deposits and interest earned.

4. Get Professional Guidance

Setting up a trust, predicting your child’s long-term expenses and choosing a policy are all very complex tasks, but you don’t need to face them alone.

Working with professionals who are experts in finance and disabilities may be extremely helpful to you. Professionals you may consider consulting include a financial planner, an estate planning attorney, a disability rights lawyer, a social worker, an insurance agent, and a health care professional.

Want more? Check out our blog, Special Needs Plans: C-SNP, D-SNP…What You Need to Know

We’re Here for You!

Bankers Life is here to help customers with their financial and insurance needs so please visit us at to learn more.

Bankers Life is a private company that is not Medicare, Medicaid or MaineCare and is not a governmental agency