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  • By Robert Dillard
  • Posted October 24, 2022

A Case for Survivorship Life Insurance and How it Works Together with Neurodiverse Needs Planning

We at Planning Across the Spectrum believe Survivorship Insurance is often overlooked for the comfort it can bring a parent or caregiver. Survivorship Life insurance can be an extremely valuable part of neurodiverse financial planning. We have previously talked about the importance of considering insurance for these types of financial planning needs, but Survivorship Life Insurance is a specific type of insurance that we see a lot of potential benefit in for families who find themselves exploring unique circumstances. Our financial professionals provide insurance planning for neurodiverse families to help determine if this should be something you should have.

Let’s refer to a theoretical situation to help us understand the complexities and nuances of these situations. For our example, we are going to use Steve and Ashley. Steve, age 40, and Ashley, age 38, are married and have 2 children. Their younger child Jesse is 10 years old and neurotypical. Their older child Amy is 12 years old and autistic, currently requiring 24-hour high support needs. These supports are costly, though they do receive aid through state-assisted programs based on their state’s waiver program. Steve and Ashley are not sure if Amy will ever be able to take care of her own finances and want to make sure she is taken care of financially when they are gone. Steve and Ashley have an annual income of 70k and are both in average health, with a little high blood pressure, and anxiety but nothing in need of immediate attention. Steve and Ashley figure that in order to be able to provide Amy with a similar lifestyle as they have now, even when they are not there to do it themselves, they would need an additional 1 million dollars in funds. This could successfully fund that transition as well as sustain a level of familiarity in the environment Amy lives in.

Steve and Ashley are savvy planners and look at different coverage types to help them create a stable and reliable plan. What they decide with their financial team is that it makes the most sense to look at permanent coverage instead of temporary coverage. In this case, permanent coverage makes much more sense because the need that it is helping to address is not something that is going to change. Many of these needs are not going to go away, so neither should the coverage.

So, they look at what it will cost to have an individual permeant policy on Steve alone as his health (insurance rated at preferred standard non-tobacco) is just a little better than Ashley’s (standard Non-tobacco). Many people we work with think that they will not qualify for life insurance or the specific coverage they want, however as shown in this example, you can be a typical person with common health needs and still qualify. In this example, both Steve and Ashley are at standard coverage, though Steve is qualified at a slightly better rate as “preferred standard.” So, let’s run the numbers. Based on Steve’s individual coverage he could get those extra 1 million dollars for roughly $8,820 annually. Let’s also compare the coverage Ashley could get as an individual with just a little different health rating. She could get the 1 million dollars for roughly $6,807 annually. These are not bad costs but based on their current situation they had a feeling there was a more economical solution, and there was. They had followed through on the most common solution, but it was far from the right solution, as is so often true when it comes to insurance and financial planning for those who are neurodivergent.

Their financial professional suggested that they explore a survivorship policy. A survivorship policy means that they will both be insured on one policy and the plan will pay out the benefit at the last persons passing. In this case, Steve and Ashley can set up a plan that will not pay out to their children until they have both passed. There are a lot of advantages to this approach, especially when it comes to peace of mind, but this also typically means a lower cost! For survivorship policies, the insurance company creates a shared rating based on the collective health and mortality information they have on both Steve and Ashley for a discount rating. Steve and Ashley’s objective is to fund Amy’s Special Needs Trust (SNT) as is commonly a great practice within special needs planning that yields many advantages. Generally, the best time to fund it is once they’ve both passed so as to avoid other complications. The Internal Revenue Service (IRS) is run based on hundreds of regulations and rules, and because of this, seemingly simple financial planning can become very complex. Particularly worth mentioning is the extra burden these complications and resulting issues might cause for someone who has to be in charge. These complications can be avoided fairly effectively though by using a survivorship policy. This policy simplifies the transferring of finances by working exactly when someone passes away and cannot look out for their own finances anymore.

Steve and Ashley look into a survivorship policy. Based on their plan to acquire the extra 1 million for Amy it will cost them roughly $5,622 annually! That’s a big difference from the costs mentioned earlier and works well in Steve and Ashley’s plan and financial budget so they can be able to pass that tax-free benefit of 1 million to Amy’s SNT.

Now let’s think long term and consider about 48 years from now when both Steve and Ashley have passed. They have paid a total of $269,856 in premiums and now Amy’s trust is funded with that extra 1 million and Amy can maintain any means-tested benefits they may have all while still maintaining the lifestyle and routine they are accustomed to. This is because of the Survivorship Policy. Without having to fear or be ready for disruption like that, Amy, Jesse, and the rest of their loved ones can focus on each other and celebrate Steve and Ashley’s lives and the legacy they created. A legacy built not only on the lives they lived but the people they cared for and how they made sure they were taken care of even after they were gone. This is how incredibly valuable survivorship policies are to clients of ours that are in the right situations to make the most of them.

Contact Planning Across the Spectrum to work with Financial Planning Professionals, including Insurance Professionals that specialize in neurodiverse family financial planning.


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