Can I utilize life insurance to provide for my special needs child?

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Asked January 17, 2016

1 Answer

Life insurance is intended to relieve the financial or emotional burden your loved ones will face if you pass away. Even if you are single and have the responsibility of a special needs dependent, life insurance can still come to your rescue.

The first thing you will need to do is calculate the amount of money will be needed to care for your child. Start with the annual costs you are facing now then multiply that number by how long you want to care for your child. Add 10% back into that amount, and you have an estimate of the size of policy you will need.

If your child has a condition that may require additional care later in life, you will need to estimate how much the additional costs might be. For example, if the special needs of your child mean that other medical problems are likely to show up later, you will need to allot for that treatment now. Add this amount to the previous total.

If you are also going to provide for living arrangements for your child, you will need to calculate what that will be. Use the same formula you used to calculate your child's care, and then add the two totals together. This includes the cost of a place to live, utility bills, and basic needs like food and clothing.

Next, purchase a permanent life insurance policy for the amount you have calculated. It is better to provide more than your child will need than to leave her wanting after you are gone, so estimate the costs at an outside figure rather than trying to get the amount exact.

When you buy the policy, set it up to pay out to a trust fund, then name your child as the owner of the trust. If your child will have a legal representative, make sure that the trust is set up so that they can access the trust for her. By setting up a trust, you can control how much money is available to the child at any given time, or even make any necessary payments for child directly.

Answered February 2, 2016 by Anonymous

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