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Life Insurance for Parents of a Special Needs Child

speacial needs life insurance

There are many reasons why an individual may decide that it’s time for them to purchase a life insurance policy. It could be because they recently got married, bought a house, or maybe because they just had a baby.

Or at least…

These are some of the most “common” reasons why someone might choose to purchase a life insurance policy which turns out to be a bit problematic for those that may not fit into these types of situations.

The reality is, in many cases, “popular opinion” about what type of life insurance policy most folks should purchase can often lead someone astray to what they want to achieve by purchasing their insurance policy.

You see…

Because most individuals will choose to purchase a life insurance policy to protect a need that will diminish over time, it only makes sense that one’s insurance needs will diminish over time as well.

For example, if you’re looking to purchase a life insurance policy to cover the your mortgage or replace lost wages, 30 years down the road from now your mortgage will probably be paid off and you may be retired.

Which means that…

Purchasing a 30-year term life insurance policy might be a good fit for you because at the end of the 30 years, your insurance needs have decreased and maybe you no longer have the need for coverage.

But what if…

  • You’re in a situation where your “insurance needs” aren’t likely to diminish over time?
  • What if you’re the parent of a special needs child who will always be dependent upon you financially?
  • Is purchasing a term life insurance policy, that could end before you passed, a good fit for you?
  • Would your child be financially secure if he or she didn’t receive a significant death benefit upon your passing?

These are…

Questions that only you will be able to answer for yourself. This is why we wanted to take a moment and discuss some of the most common questions we get from parents of a special needs child when finding the “right” life insurance policy for them.

Questions that will be addressed in this article will include:

  • What’s the difference between a Term life insurance policy and a Whole Life insurance policy?
  • Why do most financial advisors recommend Term life insurance vs. Whole life insurance?
  • Can an individual own multiple life insurance policies on themselves?
  • Are all term life insurance policies the same?
  • What can I do to best ensure that I find the “best” life insurance policy for my family?

So let’s get going!

What’s the difference between a Term life insurance policy and a Whole Life insurance policy?

If you really want to understand the difference between a term life insurance policy and a whole life insurance policy, we recommend that you check out our article Term Life Insurance vs. Whole Life Insurance.

This is because, here in this article, we don’t want to spend too much time dwelling on the differences other than to say that Term Life Insurance Policies will generally only last for a set period (10, 15, 20 or 30 years) while Whole Life Insurance Policies are designed to last your entire life.

That…

And, whole life insurance policies tend to cost WAY more initially than your average term life insurance policies, which is why most financial advisors tend to tell their clients to purchase term life insurance policies whenever possible (whether that is the “best” option for you will be something you’ll need to decide on your own).

Why do most financial advisors recommend Term life insurance vs. Whole life insurance?

Now since we just told you that “most” financial advisors like to recommend term life insurance policies over whole life insurance policies, we do want to take a moment and address the three main reasons “why” most financial advisors like to do so.

Reason number 1.

The first reason why most financial advisors like to recommend term over whole life insurance is that for most, their insurance needs will decrease over time. This means that one isn’t likely to need a huge life insurance policy 20 or 30 years from now, so paying for a more expensive whole life insurance policy might be a waste of money if your point in getting it is simply for a death benefit.

Reason number 2.

Whole life insurance policies generally cost a lot more than traditional term life insurance policies, at least initially.

In fact, it’s not entirely uncommon for a whole life insurance policy to cost up to 10 times more than term life insurance costs!

And a financial advisor would rather you take that extra money each month and invest it.

Is that the best advice? For some people, although there are many people who use whole life as a savings vehicle, in addition to the death benefit protection it offers.

Reason number 3.

Aside from just the actual “cost” of a whole life insurance policy, there is also the “opportunity cost” that needs to be considered as well.

You see, if you are paying significantly more for your whole life insurance policy than you would for your term life insurance policy, the “opportunity” to invest that money elsewhere will be lost, although some dividend paying whole life policies provide a decent return.

It is this long term opportunity cost that prompts many financial advisors to recommend

“Buy term life insurance and invest the rest!”

Which may or may not be great advice, for some though this may make perfect sense.

For others, looking to avoid risk, the idea of getting cash value growth in a whole life insurance policy is a much “safer” option.

And…

Since we here at IBUSA sell both term and whole life insurance policies, you’re not going to find us trying to “sell” you on any one particular “type” of life insurance.

Instead, we’re simply going to let you know what your options are.

This brings us to our next topic, which is…

Can an individual own multiple life insurance policies on themselves?

Sometimes, people have difficulty deciding what “kind” of life insurance policy they should buy.

Sure, they see the benefit of owning a large whole life insurance policy. Still, the cost of such a policy might be too expensive or just not something they want to take on, particularly if they believe that they might be able to productively “invest” the cost difference between a term and whole life insurance policy.

The problem is, they’re not 100% sure this is the way to go.

Layering Life Insurance Coverage

In cases like these, some individuals may choose to purchase multiple life insurance policies on themselves and “layer” or “ladder” their coverage.

This is an option some families with special needs children will utilize because it will allow them to purchase a term life insurance policy that will meet their needs with a “smaller” whole life insurance policy.

This way…

If everything doesn’t work out according to plan, these folks will still have some coverage in place (just in case). This brings us to the last topic we want to discuss when it comes to comparing term vs. whole life insurance here in this article, which is…

Are all term life insurance policies the same?

No, not all term life insurance policies are the same, which is why we wanted to ask this question.

You see, some term life insurance policies will allow a policyholder to convert their term life insurance policy into a whole life insurance policy later on in life.

Which means that…

Should you decide that owning a term life insurance policy is definitely the way to go right now, but change your mind later on down the line, it’s possible (with some term life insurance policies) to make the change from term to whole life (certain restrictions may apply).

Which may not…

Seem like a big deal to you know, but if given a choice, wouldn’t you like to keep this opportunity available to you?

Or to state it a different way, if given two term life insurance policy options at “roughly” the same price, wouldn’t you rather choose the term life insurance policy that gave you the opportunity to covert to a whole life insurance policy later on if you so desired?

We here at IBUSA think so, which is why we’ll commonly use this option as a way to distinguish between different insurance companies when trying to help you determine “which” life insurance company is going to be the “best” for you!

Which leads us to our final topic, which is…

What can I do to best ensure that I find the “best” life insurance policy for my family?

In our experiences here at IBUSA, we’ve found that usually, the “best” approach in helping someone find the “best” life insurance policy for them is to first:

Fully understand what an individual is trying to achieve by purchasing their life insurance policy and then provide one with plenty of options to choose from so that you’re not limited to just one or two different options.

This is why…

We here at IBUSA choose to work with so many different life insurance companies, so that when it comes time to help you decide “which” life insurance company is going to be the best for you, we don’t have to apply a…

“One Size Fits All Approach”

Instead, we can make dozens of different life insurance companies compete for your business.

So, what are you waiting for? Give us a call today and experience the IBUSA difference.

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