I’ve explained before how term life insurance is a good fit for most families. However, families that include dependents with special needs will likely find that whole life insurance is a better way to help ensure their financial security.
If your child (or relative) with a disability requires ongoing care for their entire lifetime, your insurance needs are different from most families. Your financial responsibility to your child extends their entire lives. Chances are good that they’ll outlive you.
That can be a terrifying prospect.
Filling in for lost wages
That’s why it’s so important to do everything you can to prepare for that eventuality. You need to ensure that your child will be supported — no matter what happens to you.
You may have some savings, retirement accounts or investments that could help provide for your special needs child. However, caregivers often leave a career behind — or seriously reduce their hours — in order to care for their loved one. This can negatively impact their pension or retirement savings or even their Social Security benefits.
A solid life insurance policy can help make up for this loss in wage opportunities and add an extra needed inheritance for your family.
Permanent insurance is key
Since your dependent will never outgrow their need for financial support, you do NOT want a term policy that will expire after a certain amount of time. Whole life insurance will provide lifelong protection, no matter how long or short you live.
You pay a fixed-price premium, and it lasts your entire life, with those payments adding up over time. As that cash value increases, it also earns tax-free interest.
An additional option is survivorship life insurance, which could collectively insure both parents under the same policy. The payout to the dependent would only occur after the second person dies. This makes it much cheaper — with a greater payout — than if you were to buy two separate life insurance policies to cover each parent individually.
Survivorship life insurance is usually offered as either whole life insurance (which is the simplest permanent insurance) or universal life insurance (which will vary based on risk.)
Calculate your dependent’s needs
In addition to hiring a reputable insurance agent, you need to calculate your dependent’s cost of care so you have a good estimate of how much insurance is best for you to purchase.
First, consider all their costs, such as equipment, medications, therapies, housing, education or transportation if they cannot drive themselves.
Next, calculate all of these expenses over the anticipated lifetime of your loved one. According to a 2017 study, the average cost of living for a disabled adult is five times larger than their non-disabled counterparts. You can also subtract any known government assistance that your dependent may have, such as Medicaid or the Children’s Health Insurance Program, because these programs will already be providing some of that assistance.
Talk about your options today
No matter which plan you choose, make sure you hire a trusted agent who has your interests in mind. Don’t wait until tragedy strikes. Let’s schedule a time to work out how best to protect your loved ones today.
