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Life insurance for people with autism

Parenting a child with autism comes with everyday joys and challenges, but it also brings lifelong concerns about the future that are particularly unique. That includes life insurance

For special needs families, financial security is intimately connected with the ability to provide long-term care that a loved one may need. That’s why it's crucial to understand life insurance options for your child if he or she has autism.

 

Can you get life insurance when you have autism?

Conditions like autism can be complicated to underwrite. That’s because there are several variables involved, says Gordon E. Conwell, III, who specializes in high-risk life insurance at Gordon E. Conwell Associates, a family-owned and operated insurance agency in Pennsylvania.

"These cases need to be shopped with many insurance carriers to find the best possible policy for each individual situation," Conwell says.

Insurers will weigh several factors when determining rates and approval for someone with autism. That includes:

  • A person’s place on the autism spectrum
  • Whether they have other pre-existing conditions
  • Medications
  • How autism affects day-to-day activities

Before making a decision, an insurer will also review your child's medical records and may require a medical exam. The insurance company will use this information to determine your child's rating or risk profile. 

Super Preferred (or Preferred Plus) and Preferred are the highest ratings. Standard (or Regular) and Substandard are the lowest ratings in the insurance classification system. The lower the rating, the higher the rates. 

In some cases, people with pre-existing conditions may be table-rated. That means an insurer bases premiums on the standard rating, plus 25%.

"A higher-functioning autistic person could qualify for life insurance," Conwell says. "Standard rates are possible for a higher-functioning autistic person, but a higher rating or a decline is possible depending on all of the variables involved."

 

How do parents buy life insurance for a child with autism?

You'll have to shop around with different insurance carriers to find a policy.

When you begin your search, it's best to work with an agent that specializes in high-risk life insurance. A professional with this experience can help you navigate the process. The expert can also explain the potential legal and financial considerations related to life insurance for someone with special needs.

However, you may have difficulty finding a policy even if you work with an experienced agent.

"These cases can be very tough to insure, and even a high-risk agency may not be able to insure many of these cases with 'regular' life insurance," Conwell says.

 

How a parent's life insurance can help a child's future

If your child can't qualify for a policy, your own life insurance might provide financial support to meet their long-term care needs.

However, there are potential legal and financial ramifications if you don't set everything up properly.

Naming your child as a beneficiary on your policy could put them at risk of losing public assistance like Medicaid or Supplemental Security Income (SSI). Federal law mandates any person who receives a gift or inheritance over $2,000 can no longer receive benefits. In some cases, Medicaid may even try to recoup any benefits it paid if your child were to receive an insurance payout.

It's best to set up a special needs trust for your child to avoid this outcome. The trust can be listed as your life insurance policy’s beneficiary. Through a trust, you can designate a trustee (typically another family member) and outline how your life insurance benefits should be used to care for your child after you're gone.

You should work with a special needs attorney who has a wealth of experience handling these kinds of cases and knows special needs law inside and out. You can find an attorney through the Special Needs Alliance or through the Academy of Special Needs Planners.

 

Instant approval and pre-existing conditions

Instant approval, which is common with term life insurance, allows some consumers to get a policy through an expedited process.

You just provide your:

  • Medical history
  • Age
  • Weight and height 
  • Information on your lifestyle habits

An insurer will use this data to predict your life expectancy and gauge the risk. The company makes an immediate decision about approval.

People with autism likely won’t get instant approval for a policy. Instead, the individual would probably have to go through the traditional insurance underwriting process and answer several questions about physical and mental health.

Permanent vs. term life insurance

Permanent life insurance, whether through a whole or universal life policy, provides benefits that never expire as long as you pay the premium. It also comes with the added benefit of cash value, which you can withdraw based on the premiums you've already paid into the policy. 

For this reason, permanent life insurance is typically more expensive than term life insurance. Term life doesn’t offer cash value and only gives death benefits for a set period. 

Conwell says if your child is approved for a policy, the decision of whether to buy permanent or term life insurance will depend on your family's needs and budget. As far as structuring the policy, parents should be sure to designate themselves as the policy's beneficiary (or another trusted family member as backup). 

If your child is approved for a permanent life insurance policy with cash value, you should establish a special needs trust or irrevocable life insurance trust with a designated trustee so that your child isn't at risk of losing government benefits. This type of trust ensures your child can access any assets in his or her name while still alive. After death, any assets still in the trust may be used to repay the government.

"For people that want life insurance up until the day that they die, then permanent coverage would be best, but permanent coverage is almost always a good bit more expensive than term life insurance," Conwell says.

 

Final expenses and burial insurance

If you aren't able to get a policy for your child, but still want some measure of coverage, final expense life insurance may be the best option.

Final expense insurance, also known as burial insurance, provides a cash payout that a family can use to pay for final expenses or other costs after a loved one dies. Someone with special needs may be able to get either a simplified issue policy, which involves answering a few medical questions or a guaranteed issue policy that doesn't have this requirement. 

One important thing to remember about this type of insurance is that it features a "graded death benefit.” Graded death benefit means the payout to beneficiaries will be lower if the policyholder dies in the initial years after getting the policy.

Because insurers take on more risk by offering these policies, benefits are considerably lower than traditional life insurance -- with benefit amounts ranging anywhere from $5,000 to $50,000.

"These policies can be expensive and all guaranteed issue products have limitations on the death benefit payout if death occurs in the first two to three policy years by any cause other than an accident," Conwell says. "Guaranteed issue life insurance products are not the ideal life insurance, but they are available."

 

Life insurance riders for people with autism

If your child qualifies for life insurance, you may be able to add riders to the policy that provides additional coverage benefits. A critical illness rider and a long-term care rider are two additions to consider. A critical illness rider provides a cash benefit to help pay for treatment if the policyholder has a qualifying illness, while a long-term care rider provides funds to pay for care in a long-term care facility should the policyholder need it.

However, it may be difficult to add these riders to a policy for a child with special needs.

 

Understanding life insurance options for people with special needs

Having a family member with special needs comes with so many considerations related to their care.

Ongoing financial planning is so important in these situations. Having some form of insurance protection should be part of this planning process, but unfortunately, getting a policy for a loved one with special needs comes with its own set of challenges.

Rather than navigate this process alone, consider enlisting the help of:

  • An insurance agent that specializes in high-risk cases 
  • A special needs attorney who can help you set up a trust that ensures your child continues to receive government assistance to help with their care

Parents also should be aware of the ABLE Act, which allows them to save for their child in a tax-advantaged account without affecting their eligibility for future government aid.

Taking all these steps can give you some measure of comfort that your child will continue to be properly cared for and financially supported even after you're gone.

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