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Life insurance when you have a special needs child

When raising a child with special needs, you may face unique financial challenges and decisions when planning your future. Here’s how life insurance can help.

As parents, protecting our kids is our No. 1 responsibility. It’s tough for any parent to consider what might happen to their kids if something should happen to them. My sister and I talk about this a lot. She’s an amazing mom to my fantastic nephew, who has special needs. Whenever my sister and I sit down to talk about estate planning or other financial decisions regarding her son, it’s not an easy discussion. She faces so many financial challenges and questions.

For her, life insurance takes on a whole new level of importance. Wanting to protect her son means more than just having him listed on her insurance policy as a beneficiary, and putting a will in place that guides his care.

Of course, as a financial planner, I know that each family is in their own unique situation. As a parent, I also know that all of our kids have different needs — financial and otherwise. That being said, a good first step to take in your estate planning process is to organize a life insurance strategy that fits within your budget and meets all of your child’s needs.

Estimate future costs

Your first step when finding a life insurance policy that meets your family’s needs is to estimate any future costs for your children. Again, because every family’s situation is different, and every child will have a different set of future needs, this may take some time. You should start by estimating what their cost of care will be – from the time your policy kicks in, for the rest of your child’s life. This might be overwhelming, and talking to your current pediatrician or care specialist can help you get a handle on what future care costs your little one might incur.

Other expenses you might add to your cost estimate are:

  • Therapy
  • Food and basic needs or expenses
  • An “emergency savings” for your child to access if needed
  • Medical expenses including prescriptions, specialists they may need to see, primary care providers and insurance premiums
  • A caregiver (both now, and if they’ll need a full or part-time caregiver as an adult)
  • Transportation costs
  • Schooling
  • Life expenses (such as weddings, cost of housing, the cost of a service animal and their care)
  • End-of-life expenses for you – and possibly for them
  • The amount needed to pay back any of your debt
  • Adaptive equipment
  • A legal advocate

Consider a special needs trust

The last thing you want is to have your assets wrapped up in probate as other family members contest wills, or try to divide up your wealth after you pass away. You want to make sure that your child has access to the money they need to cover care and all of their other living expenses right away. A special needs trust can help to get money directly to your child after you pass away while the rest of your assets are divided according to your estate plan. It helps to fast forward through any delay, and can still allow them to qualify for government benefits that they may receive as a disabled minor (or adult).

Striking the balance between making sure your child is taken care of, and also making sure that their inheritance doesn’t disqualify them from any additional benefits they might receive, is key.

A trust doesn’t just have to be the beneficiary for your life insurance. It can also be a space where you make regular contributions for your special needs child – like a kind of savings account that protects them in the event of your death. You can even tell family members about the trust, then grandparents, aunts or uncles, and other family members can contribute as well if they want to include your child in their inheritance planning.

Think about long-term care

Your main concern right now might be taking care of your child while they’re still young. The amount of care that any kid needs can stress any parent out when trying to put together an estate plan. Trying to estimate the care your child might need when you pass away can be even more overwhelming. Even though it’s easy to get caught up in the emotional and logistical concerns of planning for your child’s care, it’s important to fast forward and think about how you’ll prepare for their care as an adult, as well.

It can be tough to know exactly what level of care they’ll need, so I tend to think it’s best to air on the side of caution. You can plan for the long-term by using life insurance in a few different ways. Having enough coverage is your first step, but after that, you can try:

  • Laddering insurance policies can help you have enough coverage to meet their needs as they (and you) age
  • Look into an insurance rider specifically for special needs children that provides extra coverage
  • Finding the right term life insurance policy to cover your adult children regardless of how long you live

Most parents slowly reduce their amount of life insurance coverage as their kids grow up, move out of the house and start lives of their own. Depending on your child’s specific needs, this may or may not be the right strategy for you.

Your adult child may need additional coverage that would require a consistently hefty life insurance policy – even after your initial term life insurance ends. Estimating your costs ahead of time, even as your child grows into an adult, is so important because it helps you decide exactly the amount of coverage you need, and what type of life insurance you should purchase.

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Consider life insurance for your child

It’s easy to get caught up planning for the type of coverage you might need to protect your child, but you also need to think about what type of coverage your child needs – if any.

Life insurance for your child can also help to protect you as their parent. Being a parent of a special needs child is often a financial challenge. Expenses can be high, there might be medical debts to consider, and sometimes a parent may quit their job to care for their child full time which can impact their future retirement savings or Social Security benefits.

If something were to happen to your child, it can be challenging to recoup those expenses, and parents can get stuck in a lot of debt and without very much savings to take care of themselves in the wake of losing their child. The last thing you want while navigating unimaginable grief is to also struggle with financial hardship. Life insurance for your child can help to balance this risk – even if it’s one you never want to consider as a possibility.

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Look at all your options

Remember that traditional life insurance for you or for your special needs child doesn’t have to be your only option. You can also look at a second-to-die policy. This type of policy covers two people — and it doesn’t pay a death benefit until both individuals pass away. This can help to offer coverage for your child while keeping monthly premiums low. However, this type of policy doesn’t protect your partner in the event that they outlive you, which can be tough if they’re shouldering the costs and challenges of raising your child alone after you pass away.

As far as insurance goes, your primary options are:

  • Term life insurance
  • Life insurance for your child
  • Second-to-die policies
  • Special needs trust
  • Additional riders on your insurance policy if available*

Beyond that, it may be wise to sit down and have a conversation with your physician, a social worker, an estate planning attorney, an insurance agent, and a financial planner who specializes in organizing financial security for children with special needs. These professionals can help you to put together a plan to help protect you, your partner, your family and your child both now and for the rest of their lives.

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*Riders are available at an additional cost or may have fees when exercised.

Mary Beth Storjohann, CFP® and Founder of Workable Wealth, is an author, financial planner and accountability partner working to help clients in their 20s-40s across the country make smart, educated choices with their money. Her recent accolades include the “Top 40 Under 40” by Investment News, “10 young Advisors to Watch” by Financial Advisor Magazine, and “10 of the Best Personal Finance Experts on Twitter.” She frequently appears on NBC as a financial expert and her expertise has been featured in The Wall Street Journal, CNBC, Forbes and more. Opinions are her own.

Haven Life Insurance Agency offers this as educational information. Haven Life does not offer investment or tax advice and encourages you to seek advice from your own legal counsel, investment advisor, or tax professional. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.

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About Mary Beth Storjohann

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Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit:

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