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Every parent worry about their children’s future, but when your child has special health care needs or disabilities, it's quite normal to have additional concerns. Things like What kind of life my child wants to live? How can I take care of my child’s expenses if he/she can’t work? How can I ensure that my child also remains eligible for government benefits? Life insurance is one such tool that provides financial support and takes care of the child’s funding needs in case of your absence.
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Children with special needs may have been born with a terminal illness, syndrome, impairment, cognitive, or other serious psychiatric problems. In simple words, they are children who have a disability or a combination of disabilities that makes the learning of things or activities difficult. These children need support for daily care even after adulthood. This lifetime dependency increases the concern of the parents, knowing that they might not always be there with them. Life insurance plays an important part in the financial planning of special needs children to fund their lifelong care.
Life Insurance is an agreement between the insurance company and the policyholder, in which the insurer pays a sum assured amount to the life assured or to the assigned nominee in case the policyholder meets with an unfortunate demise in return for the payment of premium made towards a policy. Buying life insurance for developmentally disabled helps in meeting long time requirements.
The following category of life insurance plans are suggested by advisors for meeting the child’s needs at various stages of life:
It is the simplest and purest form of life insurance risk cover that pays the sum assured in case the policyholder dies. No payout will be made if the policyholder survives.
The major benefit of term life insurance for mentally challenged parents is that it creates immediate protection if something happens to you. Parents of special needs children can easily purchase a high coverage at low premium rates, that helps them fund their daily child care after paying all the dues.
In the case of traditional financial planning term insurance is not suggested after a specific age, let’s say 60 to 70 years because the responsibilities may be fulfilled by that time. This is not the same situation for parents with special needs children. Opting for term insurance is a smart decision in a long run.
Disabled life insurance is a special type of insurance policy in which a nominee is a disabled person. The insurer does not pay a lump sum amount to a nominee on the policyholder’s demise, instead regular payouts are made until death. This is a valuable disabled life insurance scheme through which a family can live a normal life even after the parent’s death.
These policies would be considered as the next right option after the term plan. Whole life insurance policies are typically an extension of ULIPs/endowment which guarantees the coverage for the duration of their as long as (in most cases fixed at 100 years) premiums are paid on time.
The number of children suffering from developmental disabilities such as Autism is on the upsurge. Universally, 1 in 68 children is detected with ASD i.e., autism spectrum disorder. In such cases, whole life insurance is a one-stop solution to every problem. A term insurance policy combined with the whole life insurance policy may prove to be the right way to secure the child’s future. As discussed, term insurance provides life insurance till the specified age and whole life insurance for an autistic child will generate sufficient cash value to fulfill the needs when a term plan is not available. Though, whole life insurance plans also have some disadvantages like traditional plans do not generate good returns to beat inflation and are unable to justify the high premium rates for investments.
Joint life policies insure father and mother under one plan. In case of the death of either one, the policy continues with the benefits accumulating to the other parent. Buying this type of policy are less expensive than purchasing two individual policies.
LIC policy for autistic child offers various benefits that help them in meeting their life goal and taking care of their day-to-day care. LIC Jeevan Aadhar and LIC Jeevan Vishwas are specifically designed to help handicapped dependents.
LIC Jeevan Aadhar is a limited premium payment whole life insurance policy that provides 80 percent of the amount as an annuity to the nominee/ beneficiary after the policyholder’s demise. Under this plan, the premiums are required to be paid for a maximum time of 35 years but the life cover continues till the death of the handicapped dependents.
LIC Jeevan Vishwas is an endowment assurance plan that offers the somewhat same type of benefits as Jeevan Aadhar. The main difference between the two is that Jeevan Aadhar does not offer maturity benefit since it is a whole life plan and is beneficial in building a large cash value for the next coming years of life. Both plans at the time of death and maturity provide an amount partly in form of a lump sum i.e., 20 percent, and remaining as an annuity to the beneficiary.
As discussed, both LIC policies are traditional plans so the payout was higher. In Jeevan Aadhar, the bonus payout is comparatively higher as compared to other traditional policies. Moreover, the rates of annuity are low in India and are not associated with inflation. The combination of these policies with the term plan is proved to be beneficial in offering regular funds to meet the current expenses of the special needs child.
The Indian Government has introduced a scheme called NIRMAYA in which the mentally challenged and handicapped individuals are covered for medical treatment up to Rs.1 lac. Another Government Social Security scheme, Aam Admi Bima Yojana is implemented by LIC that provides accident/life insurance protection to the urban and rural poor individuals and individuals belonging to recognized vocational sections such as Physically handicapped self-employed persons.
IRDAI, the regulatory authority has also issued a notification to Rural and Social sector obligations in 2002 that it is mandatory to cover the mentioned number of lives from the specified social sector such as persons with disabilities. It is defined under the Persons with Disabilities Act, 1995.
Before buying life insurance, do not trust the figures or assurances shown. Do your own calculation that can help identify real numbers. You are required to compute the amount needed after considering inflation. For example, if inflation is at 7 percent, then you require at least a 10 percent return on your investments to generate a considerable corpus in the future.
Traditional plans do not provide you with the related costs. ULIPs have lower transparency than mutual funds, whereas, mutual funds are more transparent and flexible in managing all the investments. So, it is a smart decision to buy term life insurance for special needs adults/children to cover eventualities and check for mutual funds to build long-term assets.
Term insurance can be the right option for special needs children without any hassles. You have to be sure that the cover provided by the company is sufficient to cover your medical requirements in case of any eventuality and the financial needs of your nominee in case of unfortunate demise.
Note: It is suggested to calculate the term plan premium on the term life insurance calculator online tool by Policybazaar before buying.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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