Parents who take care of children with disabilities must consider what will happen when they can no longer provide for their loved ones. While a special needs trust can help a disabled child into adult years, different insurance policies may also offer various kinds of assistance.
An important thing to remember is that insurance policies vary in their coverage. A caretaker should consider multiple options to fill in coverage gaps. Policies may compensate parents for lost income or help a special needs child directly.
A parent who contracts a serious illness or sustains a severe injury might no longer be able to work. Short-term disability insurance can provide assistance for a few months. However, Kiplinger explains that long-term disability insurance may cover a portion of missed income for much longer. This coverage usually pays 40% to 60% of a base salary.
Income protection insurance
Parents interested in covering more of their income might benefit from income protection insurance. In addition to compensating for lost wages, some income protection policies cover bonuses and commissions.
Benefits generally last until the policyholder recovers from an illness or injury, or reaches a maximum benefit period. The loss of benefits happens when one of these two events occurs first.
Whole or term life insurance
A parent who takes out a life insurance policy may direct it to pay out to a child or special needs trust after the parent dies. Policy Genius explains one way parents who pursue this option could manage such a policy, by naming someone to be the custodian of the policy to manage the insurance funds after the death of the parent.
With the variety of insurance policies available, a parent may find one to help complete a special needs plan to help ensure a loved one has provision for years to come. It is important to be thoughtful about how such policies and the proceeds from the policies might be managed, such as through a conservator or through a special needs trust. You should speak with your legal advisor for disability and estate planning issues to help make the best decisions for your family.