Special Needs Planning

Life insurance and financial professionals often seek to differentiate themselves from their competitors. Some might work with young professionals. Others help older, wealthy clients manage estate tax issues. Still others may find a niche coaching business owners with regard to buy-sell planning or employee benefits. What about helping those who have a family member with special needs?

Most cases will start with helping the parents of a child with special needs. However, other family members—including siblings and grandparents—can end up in the role of financial caretaker for a person with special needs. With the advances in medical care, many special-needs family members can live for a long time, making financial planning especially important.

Types of Issues Common to Special-Needs Families
Families who are taking care of members with special needs are dealing with financial concerns that are of a different shape than more traditional clients.


Retirement planning for most clients involves making sure the individual, or both spouses if married, have enough savings to produce the income needed to maintain lifestyle in retirement.
A special-needs child may not be able to produce income at any point during his or her lifetime to pay for the child’s own support. Usually the child’s parents must make plans to provide for that support for as long as the child lives.

In the special-needs arena the life expectancy of the family member who needs care can be an important factor in making sensible financial plans. In some cases, even though a child is impaired, the family expects the child to have a normal life expectancy. For many, in addition to normal support needs, supplemental medical or therapy expenses can last a lifetime.

When working with parents who have a child with special needs, the lump sum needed to support a comfortable retirement can easily be more than twice that of a comparable married couple without a special-needs child. Likewise, extra life insurance coverage is needed to protect against the shortage of funds due to the possibility of a preretirement death.


Family who want to make assets available to special-needs beneficiaries should generally consider drafting a special-needs trust. A special-needs trust or supplemental-needs trust (SNT) is a specialized legal document designed to provide benefits to the beneficiary without adding to the person’s countable net worth or countable income.

An SNT can be created to come into existence immediately, or it can spring into existence in the future. For example, a special-needs person’s parents might create an SNT inside of the last will or revocable trust. However, families are encouraged to prepare a stand-alone special-needs trust so they can have the peace of mind that the trust is created and in existence during their lifetime.
An SNT enables a person with a physical or mental disability to have, held in trust, an unlimited amount of assets. If the SNT is drafted and administered properly, those assets do not count against SSI or Medicaid eligibility.

An SNT gives the trustee the ability to provide for supplemental and extra care over and above that which the  government provides. The SNT must not require the trustee to make distributions for the special-needs beneficiary, as such a requirement would cause the trust assets to count as available resources.

To be effective, SNTs must be irrevocable once they are created and funded. An attorney drafting the trust will coach the family about how the trust should be administered and will include directions in the trust for its termination and ultimate distribution to family members or other beneficiaries.


  • As with any other trust, making the right selection for the trustee can mean the difference between adequate financial support for the beneficiary and failure to meet the planning objectives. Consider hiring a professional trustee to complement the caregiving skills of a family guardian.
  • SNTs can be created to exist right now or to spring into existence at someone’s death (usually the caregiving parent). In many cases, choosing the testamentary trust approach will offer the most flexibility to the family.
  • There can be tension between the choices of naming an individual the beneficiary of a qualified account asset (such as an IRA) or naming a trust beneficiary. Issues such as taxation and stretch options may be less important to those who have a special-needs beneficiary than the proper care of the loved one.
  • If a special-needs beneficiary gets money directly from an inheritance or by beneficiary designation, it may revoke eligibility for needs-based benefits, and getting eligibility back may be difficulty. While undoing a bequest though post-death estate planning by using a qualified disclaimer is possible in many instances, that technique is probably not effective to restore a beneficiary’s access to needs-based benefits.

Prudential released a new version of PruLife Universal Protector, now noted as the (2016) version. As with many of their previous updates, Prudential applied flat rate increases to single, short and full-pay designs. Among the steady stream of reprices in the NLG market, after this reprice, PruLife Universal Protector (2016) retains most of its previous strength, despite undergoing its second premium increase of 2016.

At the beginning of 2016, PruLife Universal Protector (2013) was a steady, top-quartile product when considering shorter pay designs. Unsurprisingly then, PruLife Universal Protector experienced the highest premium increases at single pays (5%), followed by short pays (2.5%), and full-pays (≈ 1.5%). The product remains strongest in limited-pays with younger clients, but its strength wanes with middle-aged consumers and as guarantees become more limited. For younger ages (20-35) looking at shorter-payment solves, premiums will fall within 10% of the lowest-priced no-lapse guarantee product.

Of course, when comparing based on Prudential’s Age Last Birthday Advantage, PruLife UL Protector (2016) competitive positioning only strengthens among its peers.

Targets were unchanged, remaining weak outside of tabled-rated clients.

On Monday, March 14th, Symetra updated their universal life offerings, rebranding UL-G as UL-G 2.0 and CAUL as CAUL 2.0. Targets decreased for most clients over 40 and increased for most substandard clients, but premiums and accumulation patterns were unchanged. With the update, Symetra also introduced two-year rolling targets and a unique return of premium rider.

With no changes in premiums or cash values, UL-G 2.0 retains its dominance for clients 45 and older in full-pay arrangements. CAUL 2.0 is generally a middling play in the current assumption market.

Symetra is the fourth carrier to introduce or revamp a return of premium rider in the past five months. UL-G 2.0 offers a 100% return of premium to policyholders in years 20 and 25. Unlike the rest of the ROP riders in the NLG market, Symetra adds roughly a 3.7% charge to their base premiums for the rider. On the other hand, Symetra does not cap the return of the premium for non-tobacco clients, something no other carrier can boast. (Note: smokers and substandard clients are capped at 50% of paid premiums.)

Because UL-G 2.0 enjoys such solid competitive positioning for clients 45 and up without the rider, Symetra can afford to charge for the rider, remaining in or near the top quartile after the rider’s 3.7% upcharge is added to these clients’ premiums. The death benefit caps with other carriers’ riders typically only come into play for clients 55 and older, a niche among which Symetra frequently features the best premiums relative to other ROP products.

Symetra offers an enticing NLG product to clients over 40 with and without the return of premium rider. For those considering NLG products with an ROP rider, Symetra presents a very competitive option, but in a tight race, the best choice for each client will largely be dependent on that client’s age, risk class, and the value (s)he places on premium and ROP flexibility.

Genre: What Zika means for you and your clients

Zika Virus Outbreak – What Does It Mean for Insurers?

Issue: March 2016 | Life | By Tim Eppert, Senior Pricing Actuary, Cologne

In February 2015 the Ministry of Health in Brazil investigated and later confirmed an outbreak of Zika virus that has since then spread rapidly through Latin America. Infection with Zika commonly causes very mild symptoms but this outbreak has created global news headlines and prompted some startling reactions. The WHO declared a global public health emergency, Brazil deployed 200,000 troops to battle mosquitos and women across Latin America were advised to postpone pregnancy.

A link is suspected between the occurrence of Zika in Brazil and an apparent increase in microcephaly reported amongst newborns. Microcephaly is a devastating condition that means babies are born with smaller heads and brains than normal, leading to significant developmental problems.6 The association with microcephaly raises concerns that infection with Zika virus may be significantly more harmful than has been suspected to date.

The Ministry of Health in Brazil projected between 440,000 and 1.3 million Zika infections in 2015. The WHO estimates 3 to 4 million people in the Americas might become infected during 2016.7 More recent modelling concluded that during this first wave of Zika, 1.1 million pregnant women may be affected and 64 million infections in total could occur in the Americas.8

Zika virus – a short history
Zika, a virus related to Dengue and Yellow fever, was first isolated in humans in 1952. The mild symptoms associated with infection – fever and skin rash – brought it comparatively little media attention.9 The largest outbreak to date, in French Polynesia in 2013, was associated with neurological complications, and a retrospective analysis revealed a related increase in birth defects.

The virus is spread mainly by bites from infected female mosquitos of the subtype Aedes – in particular, Aedes aegypti. Zika could spread to all areas where these insects are found, including most of South America, southern parts of the U.S., Southern Asia, Southern Europe, the northern parts of Oceania and most of Africa. It has been suggested that Zika arrived in Brazil with visitors to the FIFA World Cup in 2014, and movement of people for the Olympic Games later this year may contribute to the virus spreading further. Human-to-human transmission via sexual contact has been reported, leading several health authorities to issue advice about safe sex.

What are the risks?
The main concern in the recent outbreak has been for pregnant mothers passing the virus to their unborn children. While there is no definite proof – yet – that Zika causes microcephaly, doctors have isolated the virus in foetal brain tissue and can explain how it damages the brain of an unborn child.14,15

No relevant increase in microcephaly has been reported in African and Asian countries where the virus has been present for decades. By contrast, the rise in suspected cases in Brazil is dramatic – more than 20 times normal and affecting between 4.5% and 8.9% of all births in the most affected regions.16 The fact that the outbreak is still active means a further increase in cases of suspected microcephaly in Latin America is to be expected. Once the disease is “established” in South America, the numbers of microcephaly will decrease again, as prior contact with the virus will lead to immunity in future pregnancies.

Zika infection is also linked with Guillain-Barré syndrome, a neurological disease that causes the body’s immune system to attack the peripheral nerves. Guillain-Barré can cause muscle weakness and life-threatening paralysis in the acute phase if breathing muscles are affected. It is fatal in 5% of cases and about 20% of people affected remain severely disabled despite treatment.

French Polynesia experienced a 20-fold increase in Guillain-Barré cases during the 2013 Zika virus outbreak. Although several Latin American countries currently report a rise in Guillain-Barré, even if the 2013 situation is replicated, the absolute numbers will be limited as the normal incidence is very low (less than two per 100,000 person years in Western countries). An increase in other neurological syndromes, such as meningitis, was also observed in French Polynesia, but no such increase has been reported in the current outbreak.

How solid are the numbers?
While the reported numbers of microcephaly are reason enough to react, the magnitude of threat is under debate. Brazil only introduced mandatory reporting of all suspected microcephaly last year so a certain increase in cases is not surprising. The heightened concern about microcephaly and Zika virus may have led to over-reporting.

There are differing definitions of microcephaly measured by head circumference. Brazil initially set a limit below 33cm and later below 32 cm (plus a certain deviation from the average circumference for a specific gestational age). Data on head circumference of babies without congenital malformation show that around 7% of all new-borns in Brazil measure below 32 cm without any impact from Zika virus.20 A major risk factor for a small head circumference in otherwise healthy babies is premature birth.

A March 2016 update by the Brazil Ministry of Health covers cases reported, based on revised maximum head circumference standards for potential microcephaly (31.9 cm for boys and 31.5 cm for girls). The standards were revised following recommendations from the World Health Organization (WHO). Between October last year and March 2016, there were 6,158 potential microcephaly cases, out of which 1,182 were ruled out. In 745 cases of microcephaly (and other nervous system disorders) suggestive of congenital infection, 88 are confirmed related to Zika virus. A further 4,231 cases of suspected malformation are still being investigated.

Research suggests Brazil could expect nearly 180,000 suspected annual cases of microcephaly annually, given the definition currently used.22 While this does not question the dramatic recent rise in children born in Brazil with microcephaly, a reliable estimate of the scale of the problem is aggravated by the factors mentioned above, and looking only at all reported possible cases may show a distorted picture.

What does this mean for life insurers?
The suggestion that Zika infection is linked to microcephaly is of concern in the context of pre-natal cover and family policies that include children automatically. In writing insurance in areas that are affected by the Zika virus and experiencing an abnormal rise in the incidence of microcephaly, it may be prudent to consider excluding benefits for congenital conditions in unborn children.

The increased mortality and morbidity from microcephaly could impact policies that extend coverage to unborn or newborn children without (sufficient) underwriting – even if microcephaly is not explicitly covered. Products that enroll children only after a certain age – when potential congenital defects are already detected – or that use underwriting are likely unaffected.

Certain Critical Illness products include partial or additional payments for Guillain-Barré syndrome. Projections suggest that Zika could lead to a notable increase in total claims for a limited period of time. For example, a 20-fold increase in Guillain-Barré would lead to an incidence of around 30 cases per 100,000. As a comparison, the cancer incidence for Brazil in the age group 40-44 is 150 per 100,000. Levels of Guillain-Barré will not shift permanently higher due to the acquired immunity after infection with Zika virus.

Concern over Zika shows how globalization and expanding population increase the risk that infections are spread more often. It also serves to remind that climate change might lead to new health risks, as mosquitos can populate new areas.

Despite an increase in research activity, a vaccination against Zika is not expected soon, so the virus may continue to pose a threat for several years. While this global alert for Zika will be temporary, together with other outbreaks of infectious diseases such as MERS and Ebola, it looks like the potential impact of infectious diseases is on the rise again – and other outbreaks are to be expected in the future.

Download PDF version for Endnotes