Why You May Need Life Insurance – Special Needs Child

Child 1Last week I wrote, “Does Everyone Really Need Life Insurance?”  In that post I tried to make it clear that I do not believe that every American must buy Life insurance just because.

I am not saying that Life insurance is never needed.  It is one of the most important products that is available.  However, over the last 25 years I have seen so much money wasted in the form of Life insurance premiums.  People tend to pay for Life insurance without giving it the consideration that it deserves.

Yesterday I started a series of posts with, “Why You May Need Life Insurance – Final Expenses.”   In this series I want to propose some reasons why you may decide that you need Life insurance.

In these posts my intention is not to merely expose potential problems.  I want to also explain how you can use Life insurance to solve your problems.

Use the form to ask your insurance question.
Use the form to ask your insurance question.


Every parent hopes that they will have “normal,” healthy children.  However, some of us cannot look forward to the day when our children will be able to live on their own without supervision.  I know 5 couples who have a child afflicted with Autism.  They love their children and have a special bond with them.  However, their children will never be able to live independently.

Science has eliminated many diseases that retard the “normal” development of children.  Diseases like polio, rheumatic fever and measles are bad memories.  However, autism is on the rise,  “premies” and birth defects still occur and children still ride their bikes without wearing helmets.

The worst thing about my job is that I have to be so negative.  By nature I am a compassionate person and hate to add to an individual’s stress.  Unfortunately, I have to remind already stressed parents that the odds are that they will not always be there for their “special” child. Unless something out of the ordinary happens, a parent will leave this earth before their child.

A Second-To-Die (also known as Survivorship Life) insurance policy provides money for the support and care of a child with “special needs”.  These types of Life insurance policies typically have more lenient underwriting rules so that even if one parent is “uninsurable” the application has a greater chance of acceptance by the insurance company.

For your protection you should talk with your lawyer before you apply for the life insurance.  He/she will be more familiar with the laws in your state.

Your insurance company will want to list the details  from your Special Needs Trust as your beneficiary.  The trust will determine where the proceeds will go and how they are to be used to care for your child.

Whether you elect to name a friend, family member or trust as the beneficiary, if you want to eliminate their discretionary spending of the Life insurance benefits, I would recommend you to instruct that the money is used to purchase a “Life Annuity” on your child.

The “Life Annuity” will guarantee an income for the child for the rest of his/her life.  His/Her guardian can use the money to pay your child’s regular living expenses.


The problem with the “Life Annuity” strategy is that once the proceeds from your life insurance is used to purchase it, your child’s guardian is not able to take a lump sum of money out of the annuity if your child needs some special equipment, e.g. new wheelchair, mattress, etc.

One way to make plans for that contingency is to purchase a second, smaller Survivorship policy.  The proceeds from that policy can be left with the insurance company to continue to earn interest.  When that money is needed for your child, your beneficiary is able to get ahold of the money your child needs without having to jump through government hoops to qualify for Medicaid.


If you do not already have an established relationship with an insurance professional, I would like to apply for the job.  Read more about me on the ABOUT page.