Life insurance for special needs children can be no less important than that of children without disabilities. Children with disabilities need special love from you, the parents.
You neither can nor should ignore the issue of creating financial defense circles for them so that nothing may hamper their future should something happen to you.
Who Are Special Needs Children?
California government identifies special needs children as:
Children with identified disability, health, or mental health conditions requiring early intervention, special education services, or other specialized services and supports; or children without identified conditions, but requiring specialized services, supports, or monitoring.
Raising such a child can be hugely expensive.
U.S. Department of Agriculture (USDA)) reports that the estimated cost of raising a normal child through 17 (born in 2015) was $233,610. The projected cost went up to $284,750 if inflation was factored in.
Thus, inflation taken into account, the cost averaged $15,000 annually.
But if it is a special needs child, it may cost much higher than that. According to a report published by Washing University in St. Louis in 2008, a family with a special needs child needed to bear an extra 91.2 percent cost. That is, when you have a disabled child, your cost doubles.
So, it requires you an estimated $500,000 to take care of a disabled or special needs child up to age 17 or 18.
That can put you in real pressure.
The fact is, depending on the age, status and disability, the cost may even go higher (while we do not deny it may also come lower). Whatever, it creates an extra-stress on you as a parent. Sometimes, it even leads you to quit the job to give the child the care it needs. The economic loss can be overwhelming for you then.
Why Life Insurance When There Is Government Support?
You might question the justification of life insurance for special needs children when there exists government aid. Before you conclude, let’s find out how the government aid comes to a special needs child.
The government’s cash payment program known as Supplemental Security Income (SSI) is a contributory scheme. It is a supplemental income that the federal government provides to parents to cope with the expenses that raising disabled children involves. SSI grants up to $733 to a disabled child.
Even if your child receives the maximum amount, it may fall short of the actual need.
Besides there are other problems.
Problems with Supplemental Security Income
The Child May not Qualify
Receiving SSI grant is subject to meeting certain criteria. Parents of children under 18 with (1) visual impairment and (2) disability can avail this program.
And the children must fulfill the eligibility criteria.
Visual Impairment Criteria
To qualify for the SSI grant for visual impairment, the child should have a central visual acuity of 20/200 or less in the better eye with use of correcting lens.
Or, it should have a visual field limitation in the better eye in a way that the widest diameter of the visual field does not subtend an angle which is greater than 20 degrees.
To qualify for the grant for disability, the child should suffer from physical or mental impairment which is medically determinable and the condition results in functional limitations severely and markedly. It could be inclusive of emotional or learning problem and can be expected to result in death. Such condition should have continued for the last twelve months or should have the probability to continue for the next 12 months or more.
These are the conditions that are considered for SSI grants for disability:
HIV infection combined with impairments
Birth weight below 2 lbs. and 10 ounces
Several intellectual impairments
Parents’ Eligibility Criteria
Parents also have to fulfill income criteria for applying for the SSI grant. One of the most important criteria is that the applicant parent has to be a ‘limited’ income person. The amount cannot go beyond $2,000 a month from work. For both parents, the amount has to be within $3,000. Among other conditions to be fulfilled are the parent(s) could not have stayed out of the country for 30 days or more at a time, should not benefit from other government benefits like social security or pension plan. Even living on government expenses for imprisonment or hospitalization stands in the way of the SSI benefit.
Surprising or not, the government’s Social Security explains ‘limited income’ as “money you receive from other sources, such as Social Security benefits, workers’ compensation, unemployment benefits, benefit from the Department of Veterans Affairs, friends or relatives.”
Although, all these do not fall in the income category, having any of these lowers the benefit.
Financial resources also stand in the way of your getting the disability benefit. The resources limit is $2,000 for individuals and $3,000 for couples.
If you do not fall under the limited resources category, your grant will be affected. The government does not count all these for resources but they can affect your benefit. These are what will fall in the resources criteria:
Bank accounts, stocks, U.S. savings bonds;
Note that possessing anything beyond the list that you can convert to cash and/or use for food or shelter will affect your eligibility.
Other conditions may also apply.
5 Reasons You Need to Buy Life Insurance for Special Need Children
The SSI grant, you see, is something many of the disabled children cannot have access to. Even if a child has it, the money granted may fall greatly short of the actual need.
This is why, you cannot ignore life insurance for special needs children. We are showing you 5 important reasons you need insurance when you have a disabled child.
The Child’s Financial Security Is Important
Your child with disability may reasonably outlive you. Should something happen to you suddenly and there is no financial shield for the child you are a parent to, its life will be in jeopardy. The far-reaching effects may include from day-to-day expenses to medical expenses.
You see the SSI grant is not enough to meet the costs the child will require.
Out of Pocket Cost Needs to Continue
You now add money out of your pocket to raise your child with disability. When you die, perhaps there will be none to make the contribution to the taking care of the child. This will deprive the child of the same care it is receiving now or should receive in future.
Life insurance for special needs children can be a tool to facilitate the financial back-up the child will need past your death.
The Cost Will Go Up
Disabilities often worsen over time. Some disabilities become more expensive toward the end. So, there are possibilities that the expenses will go up over time. But the monetary allocations from Social Security Income will not go up so soon. The child will be in financial trouble if it depends completely on the SSI money.
SSI Money Will Have Diminished Value
The supplementary dollars that the child receives now will have diminished value over time. Inflation will eat away its power. As a result, the child will find it hard to get what it will need. Thus, the already meager money may prove too meager when you are not by your child.
So, you see, in view of inflation, you need to consider buying life insurance for your disabled child.
Dependence Will Affect Proper Care
If you do not arrange financial support while you are alive, your child will become completely dependent on the Supplemental Security Income. Depending on supplemental income for day-to-day living will take away the medical and other cares it will need.
Thus, if you do not want your child to be deprived of every support it should get, you should be thinking of life insurance for special needs children.
Problems with Life Insurance for Special Needs Children
You cannot make your disabled child the beneficiary to a life insurance policy. If you do, you will end up losing the government benefits. This government policy undermines the future of the child. So, the best choice for the parents is to entrust the responsibility with a Supplemental Disability Trust (STD).
Entrusting your life insurance with a trust leaves a legal caregiver to your child. Buying a life insurance for the disabled child and giving the responsibility to such a trust can ensure that your child will be alright behind you.
You may sign a contract with such a trust and they will remain under obligation to take care of your child as per the contract.
But remember, there are 3 things you should know about a SDT.
One, setting up the trust can be expensive costing nearly $3,000.
Two, when your assets go to a SDT, high taxes are levied on them.
Also, you need to find an attorney to define the terms and conditions so that the child may not be deprived or exploited.
Alternately, finding someone responsible, affectionate and caring to the child can be the best decision for you. Such a person should be someone from within the family or relatives. But making sure that the person is whole-heartedly willing to take the responsibility is important.
You should not thrust the responsibility on someone’s shoulder who does not come forward willingly or happily.
But a trust, we admit, bears the very guarantee that you should have when it comes to your child’s care. A family member who is not a parent or of parental status, may not be that trustworthy.
What Type of Life Insurance Should You Buy?
As you see, you had better not rule out life insurance for the special needs children, you need to know what type of life insurance you should buy.
In fact, there is no life insurance for special children by product category, you need to choose either a term insurance policy or a whole life insurance policy.
Term Insurance for Special Needs Children
A term life insurance policy works for a number of specific years that you want the protection guarantee for. If you die within those years, your trust or the family member will receive a net amount of money from the insurer. But if you outlive the years, the child will receive nothing.
So, having a calculation about how long the child will require protection is necessary.
You may choose term insurance for the special needs child when its life expectancy is not very high. The term duration should be in tune with the expectancy.
Whole Life Insurance for Special Needs Children
Your whole life insurance policy protects the beneficiary for the entire of your life. Whenever you die, the nominee will receive the benefit. This policy can often be beyond the catch of a low-income person. If the child bids prospects for long-time survival and you can afford, whole insurance is a good decision for you.
No matter when you die, the child will have the protection that it will need. But, we remind you, you cannot make the child your nominee.
How to Determine Coverage for Life Insurance for Special Needs Children
You do not need a financial adviser to determine how much coverage you should buy for a special needs child.
The following tips will help you take the right decision.
Think of the complications and consider the probable expenses over the expected longevity of the child. You can calculate the coverage by following the steps below:
Calculate how long you want the insurance for your child.
Take into consideration the day-to-day expenses it will need over the time from now on.
Have a calculation as to how much instrumental supports (like wheelchair) it will need over the time.
Think of the medical bills that might come in over the years. Do not ignore the deteriorating times when there will be more bills.
It is hard to think but add the funeral costs that will be eventually there.
Add some money, ($50,000 minimum) so that the insurance covers inflation.
How to Buy Life Insurance for Special Needs Children
Buying life insurance for special needs children can be a hard job.
The reasons are: (1) you child will not qualify in most cases and (2) even if it does, the policy can be sky-rocketing.
That means, it is on you that you should purchase your life insurance policy so that the child may live just the way it deserves to be living behind you.
(We took it granted that most parents will not get the SSI benefit. So is this recommendation.)
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