You’ve been told that people with Down Syndrome can’t get life insurance. However, that is not true.
People with Down Syndrome can obtain life insurance. That is right.
If you have a relative or loved one with Down Syndrome and are thinking about obtaining life insurance on them, you have come to the right place. We have helped many families with children, young adults, and older adults with Down Syndrome obtain life insurance.
Not all types of life insurance are available. Moreover, there is a process if you want to obtain life insurance on someone who has Down Syndrome. We explain all of this and a major pitfall many people, families, and even agents overlook.
In this guide, we describe how you can obtain life insurance on your loved one or relative with Down Syndrome. Specifically, we tell you:
- Why is it hard for someone with Down Syndrome to obtain life insurance
- Life insurance options for people with Down Syndrome
- Life insurance premium cost
- A major pitfall to watch out for
- How we can help
Let’s start and answer the question, “Why is it so hard to get life insurance on someone with Down Syndrome?”
Why Is It Hard For Someone With Down Syndrome To Get Life Insurance?
Many people tell us that carriers declined their loved one life insurance. Why is it so hard to obtain, they ask?
Here’s why it is hard. People with down syndrome, as you know, may have additional health concerns as well as a life expectancy that is shorter than the average person. According to the National Association For Down Syndrome, the average life expectancy of a person with Down Syndrome is 60 years old. Moreover, people with down syndrome could face additional health conditions including congenital heart problems among other things. Finally, many people with Down Syndrome do not have the cognitive ability to enter into an insurance contract.
Many life insurance carriers are aware of this. They don’t want to undertake that risk. So, they decline.
Moreover, carriers consider a person’s ability to work. People with Down Syndrome usually can’t work full-time. Usually, they are on social security disability or supplemental income. Having the ability to employ and work is a component of the life insurance underwriting process. Additionally, so is the ability to live independently. Not necessarily by oneself, but having the ability to dress oneself, carry a conversation, manage a checkbook, and other everyday activities.
These are the reasons why people with Down Syndrome have a hard time obtaining life insurance through a traditional underwriting process.
Let’s be clear. This means that traditionally underwritten life insurance is hard to obtain for people with Down Syndrome. However, life insurance options exist. Let’s talk about those options next.
Life Insurance Options For People With Down Syndrome
There are several life insurance options available for people with Down Syndrome. Are they perfect options? Here’s what I mean. Generally, a person with Down Syndrome can’t obtain a life insurance policy with a death benefit of $1,000,0000. (Or, even $100,000 likely.) However, he or she can obtain some amount of life insurance that can be used for burial needs and final expenses. That should give you some peace-of-mind. We discuss these options next.
Group Employer Life Insurance For People With Down Syndrome
Group employer life insurance is an option; however, it usually is available if your loved one has a low to mild form of Down Syndrome. He or she must have the cognitive ability to understand and sign financial documents. If that is the case, and your loved one qualifies for group life insurance, this is a viable option. Typically, with group life insurance, the application asks no health questions.
In most cases, the person with Down Syndrome must work full-time. With most group employer carriers, that requirement is a minimum of 30 hours per week. As you are aware, many people with Down Syndrome do work, but likely not as much as 30 hours per week.
Again, it must be noted that in this case, your loved one must have the ability to sign and understand what he or she is signing. If you have guardianship or Power of Attorney on your loved one, then likely the group employer life insurance is unavailable.
Nevertheless, this might be an option if your loved one qualifies. However, if not, we still have options for you as you can read next.
Guaranteed Issue Life Insurance For People With Down Syndrome
Guaranteed issue life insurance is likely the option for your loved one. What is guaranteed issue life insurance coverage? Here it is in a nutshell:
- a whole life insurance plan with small death benefit, usually not more than $25,000.
- no health questions. Just a couple of administrative questions to answer.
- a waiting period on the death benefit. More on that in a minute.
Often, $25,000 is typically enough life insurance for a person with Down Syndrome. It will help pay for burial needs and other final expenses.
As we mentioned, these guaranteed issue life insurance policies are typically whole life insurance policies. This means the life insurance contains a cash value. Some carriers we work with also pay a dividend on these policies. You can elect to take the dividends in cash, lower your annual premium, or use them to purchase more insurance. In general, we recommend purchasing more life insurance.
All you do is apply, pay the initial premium, and you have life insurance.
As I mentioned earlier, these policies have, what I call, a “waiting period” on the death benefit. Some policies have a two-year waiting period. Others have three. What does this mean? If your loved one dies within the waiting period, you will receive your premiums back plus interest.
Why do the carriers have a waiting period? They must mitigate their risk. They know people who apply for guaranteed life insurance usually can’t qualify through traditional underwriting. When you think about it, however, receiving your money back is a no money-loss situation for you.
Can you obtain this insurance on children who have Down Syndrome? Let’s talk about that next.
Life Insurance For Children With Down Syndrome
I think I know what you are thinking…
John, I would like to purchase some life insurance on my (child or grandchild), but all the companies decline.
We talked about this earlier. It is true. Most carriers do. However, just as we point out above, guaranteed life insurance exists. If you are purchasing for a child with Down Syndrome, likely the premium is not that great. Whole life insurance would be the common life insurance option. We work with a few carriers in the whole life market that cover children, starting at age 0 (newborn), at guaranteed issue. That is right, it is possible to obtain life insurance on a child with Down Syndrome.
The cost of a guaranteed issue whole life policy for an 8-year-old boy with Down Syndrome could cost around $12 per month, depending on the death benefit amount.
What If My Loved One Has Mild Case Of Down Syndrome?
Every once in awhile we receive a phone call from a parent or a loved one who says their child or relative has a low to mild form of Down Syndrome. The loved one wants to know if traditional underwritten life insurance is possible. The person with Down Syndrome works, doesn’t receive SSI or SSDI, and lives independently among other positive characteristics.
Traditionally underwritten life insurance on people with low to mild cases of Down Syndrome is possible. Yet, it is still very tricky, too.
Your loved one needs to have the cognitive ability to know what a life insurance contract is and what he or she is signing.
Moreover, he or she would need to independently answer the health questions.
Additionally, your loved one would need to qualify in other ways for underwritten life insurance. For example, he or she would need to have a good height/weight (BMI) and generally free from other ailments.
Finally, your loved one may need to complete a phone interview with an underwriter.
Having said this, yes, it is possible for your loved one with Down Syndrome to obtain underwritten life insurance. We are happy to say that we have helped some families this way.
However, the options we described earlier and next are usually the best options for people with Down Syndrome.
Life Insurance…On Yourself
Many parents of children with Down Syndrome immediately want life insurance on their children, and rightfully so. However, they often forget about themselves. Having an extra life insurance policy on yourself is a viable solution here.
If set up correctly, you can have a trust as beneficiary of the policy. The trust will then benefit your child with Down Syndrome. Many types of life insurance is used, such as a second-to-die policy.
Additionally, many term life insurance carriers offer a term rider for children without any evidence of insurability on the child. What this means is you can add your child (if you are a parent or a legal guardian) to your policy without any answering any health questions about him or her. You must, however, apply yourself for the term life insurance policy and add the rider at the time of application. This means you yourself must be healthy enough to qualify for life insurance. This option, however, is a very viable one.
Finally, if you are a grandparent, some final expense and burial insurance carriers allow you to add a grandchild to your policy without any evidence of insurability. The face amounts are usually limited to $5,000, but it is coverage nonetheless.
This all sounds great, John, you say. But, is this going to cost me an arm and leg?
The answer is, likely not. Let’s show you premiums next.
Guaranteed Issue Life Insurance Cost For People With Down Syndrome
There are a few carriers we use for families who have loved ones with Down Syndrome. These carriers will insure children as well, even newborns. It is guaranteed issue life insurance which has a 2-year waiting period. Remember, this is likely the only option for your loved one.
Guaranteed issue life insurance can be affordable. We work with several carriers including some who will cover children on a guaranteed issue basis.
Expect to pay the following premiums for $25,000 of coverage. Rates might be different and based on state availability, gender, and death benefit amount. They are subject to change. Contact us or use the form at the end of this article if you would like more information.
Watch Out For This Major Pitfall!
So, the premiums don’t seem that bad, do they? Consider that it is better to spend $100/month rather than $25,000, yes the premiums are not that bad at all.
Before you decide to sign up, there is a major pitfall you need to be aware of. I can almost guarantee you won’t hear about elsewhere.
The pitfall is having your loved one with Down Syndrome as owner of the life insurance policy.
Why is that, John, you ask?
If a person with Down Syndrome has any assets in his or her name, then likely he or she loses valuable public assistance and other types of resources. Assets include cash value whole life insurance. The guaranteed issue life insurance we described contains cash value.
State law determines how much assets and income a person can have to qualify for public and government assistance (including Medicaid). Typically, this amount is $2,000. It’s not much. Anything above this amount, and the person loses valuable aid.
You don’t want that to happen, right? What can you do?
Thankfully, there are a few ways around this. We will give a general overview next. However, if you have specific questions, I highly recommend you speak to an estate planning attorney who specializes with special needs situations.
The Fix – Change Ownership
There are a couple of ways your loved one can still qualify for valuable aid and have a life insurance policy.
The two ways include:
- you can be owner of the policy, or
- you can have a trust as the owner of the policy.
If you are the owner, you will need legal guardianship and/or power of attorney. This allows you to sign and execute the insurance application on your loved one’s behalf.
We get this statement a lot, “John, I have been guardian of (insert person’s name) since she was a baby.”
I am sorry to say, but that is not guardianship.
You see, when your loved one turns 18 or 21 (depending on the state), he or she becomes an adult.
Your state doesn’t see your loved one’s disability. The state sees a person who, as an adult and by state law, can now enter into contracts and sign his or her name. He or she has cognitive ability to enter into contracts.
The problem is, your loved one likely can’t (as we discussed earlier).
However, the guardianship or power of attorney designations allow you to sign and enter into legal contracts on behalf of your loved one. Just make sure your designation allows you to do that.
If you establish a trust for your loved one, the trust can be owner and (usually) beneficiary, for the benefit of your loved one.
I recommend speaking to a qualified estate planning attorney if you have additional questions about this.
What Is The Problem If My Child With Down Syndrome Owns Life Insurance?
If you purchase life insurance when your loved one is a child, no guardianship, power of attorney, or trust is needed. As long as you have an insurable interest ( as such with a parent-child relationship), you can sign as owner easily. It is very easy to do!
However, a big problem arises when your loved ones are adults. When they are adults, usually 18 or 21 (but check your state), they automatically become owner of the life insurance.
You will want to make sure you have the guardianship, Power of Attorney, or trust in place before this happens. Otherwise, your loved one runs the risk of losing valuable resources, programs, and aid as we described earlier. The reason is that they automatically become owner of the life insurance policy. Unless, of course, you show you have legal ownership of the policy.
Again, I am not an estate planning lawyer, so I recommend contacting one in your state for more specific information.
How We Can Help
If someone says you can’t purchase life insurance for someone with down syndrome, you now know they are wrong. Life insurance for people with Down Syndrome does exist. There are many options.
Don’t know what to do next? Need our help? We would be more than happy to help you secure life insurance coverage for your loved one. Simply contact us or use the form below. As with everything we do, we only work in your best interest only. That means if there is a better solution available that we can’t provide, we will put you in contact with them and help you every step of the way. Do you think most agents and agencies do that? Likely not.