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Life Insurance to Protect a Disabled Child in Canada
By Parvesh Benning, Licensed Life Insurance Broker
Most parents are told to buy whole life on the child, but the more important first move is getting the right amount of coverage on you, the parent, and naming a trust, not your child, as the beneficiary.
This guide is for parents who want a child with disabilities looked after financially after they are gone. You insure your own life, structure the payout through a Henson trust so it does not cut your child off from ODSP, AISH, or BC PWD benefits, and coordinate it with the RDSP. Here is how the pieces fit, and what to get right first.
Updated: July 8, 2026
Life Insurance to Protect a Disabled Child in Canada
By Parvesh Benning, Licensed Life Insurance Broker, Updated: July 8, 2026
Most parents are told to buy whole life on the child, but the more important first move is getting the right amount of coverage on you, the parent, and naming a trust, not your child, as the beneficiary.
This guide is for parents who want a child with disabilities looked after financially after they are gone. You insure your own life, structure the payout through a Henson trust so it does not cut your child off from ODSP, AISH, or BC PWD benefits, and coordinate it with the RDSP. Here is how the pieces fit, and what to get right first.
Here is what surprises most parents: for a policy on you, it is generally not your child’s disability that gets underwritten. When you apply, the insurer looks at your health, your age, and your lifestyle. Qualifying is rarely the hard part.
The real decisions are how much coverage to buy and where the money goes when you die. Send a payout straight to your child and it can count as their asset, which is exactly what puts income-tested benefits at risk. That is the problem this guide solves.
Can a parent of a child with disabilities get life insurance?
Yes. It is the parent who is assessed, not the child, so a child’s diagnosis usually does not affect the parent’s rate directly. The two things that decide whether the plan actually works are buying enough coverage and naming a Henson trust, not your child, as the beneficiary, so the payout does not reduce ODSP, AISH, or BC PWD benefits.
Skip to a section
- Why this matters, and what is really being insured
- How insurers assess you, the parent
- Which policy fits: term, permanent, or no-medical
- How to set the coverage up the right way
- Protecting your child’s benefits: Henson trust and provincial rules
- Coordinating the payout with an RDSP
- Documents that strengthen your application
- What your lawyer and accountant handle
- Frequently asked questions
Why this matters, and what is really being insured
The thing being insured here is you, the parent, not your child. That trips people up. They assume a child’s diagnosis makes coverage hard to get or expensive, and for a policy on the parent, it generally is not what the insurer underwrites.
What you are really buying is a way to keep supporting your child after you are no longer here to do it yourself. For a child who may never earn a full income, that support can need to last decades. So the money has to do two jobs: show up when you die, and reach your child without knocking them off the benefits they rely on.
The income job
Replacing what you would have earned and covering debts, so the household keeps running. This is the piece most families underestimate.
The lifetime job
Funding care, therapy, housing, and day-to-day help for a child who may need it for life, long after the working years are over.
The protection job
Getting the money to your child without it counting as their own asset, which is where a Henson trust comes in later on.
Here is the order that actually matters. Get the right amount of coverage in place first. Then decide how it is structured and where it lands. Most guides do this backwards, leading with trusts and permanent policies before anyone has asked the basic question: how much does this family actually need?
If you are still weighing what type of policy does which job, the breakdown of term life insurance versus permanent coverage further down will make the choice clearer.
How insurers assess you, the parent
Insurers assess your health, your age, and your lifestyle, not your child’s condition. A child’s diagnosis does not get rated on your application. What the underwriter is really asking is a simpler question: how likely are you to be around, and for how long?
That means the levers are the same ones that apply to any applicant. Your medical history. Whether ongoing conditions like blood pressure or diabetes are managed and documented. Smoker status. The kind of work you do. Nothing here is special to caregiving families, and that is the point worth hearing if you have been putting this off.
If your own health or time for a medical exam is the sticking point, that does not close the door. It just points you toward a different lane, which is the no medical life insurance route covered in the next section. Where a broker earns their keep is knowing which carriers treat your specific health picture more kindly, because they do not all read the same file the same way.
Which policy fits: term, permanent, or no-medical
For most families, term life does the heavy lifting, because it buys the most coverage for the least money. You do not need to pick one product and marry it. These three fit different jobs, and plenty of families end up with a mix.
Term life: the workhorse
Covers you for a set stretch (10, 20, or 30 years) at the lowest cost per dollar. Carries the income and debt job through the years your costs are highest.
Fully underwritten, $500K / 20-year
Healthy non-smoker, age 40: from about $44/mo (male) or $32/mo (female). Age 35: roughly $30 and $22.
Permanent / joint last-to-die
Lasts your whole life and can fund a trust for a child who needs support long after you are gone.
For a couple, a joint last-to-die policy pays out at the second death, exactly when the trust needs funding, and usually costs less than two separate policies. Premiums are higher, so it is the layer you add once the core amount is handled.
No-medical: when health or time blocks you
Skips the exam, uses a short health questionnaire. Lower limits, higher price for what you get.
Simplified issue, $500K / 20-year
Assumption Life Platinum Protection, age 35 non-smoker: from about $59/mo (male) or $52/mo (female), roughly double the fully underwritten term.
Those figures are illustrative only, based on current best-rate pricing for the class shown, and subject to full underwriting and change. Your actual premium depends on your age, sex, smoking status, health, coverage amount, and the carrier, and simplified issue pricing runs higher than fully underwritten term. You can pull live term life insurance pricing for your own numbers, and term can usually convert to permanent later without a new medical.
For the permanent side, this look at joint last-to-die policies and estate planning covers the mechanics. If the exam is your barrier, the full breakdown is in this guide to guaranteed and simplified issue life insurance.
How to set the coverage up the right way
Figure out the right amount of coverage before anything else. That is the move that matters most, and it is the one families skip.
1
Size the need first: income, debt, and the cost of supporting your child.
2
Cover that amount with term, the most coverage for the money.
3
Add permanent or joint last-to-die for the trust once the budget allows.
That is how I work through it. Get the amount right first. The permanent layer is nice to have, but it is secondary. Making sure the right amount of coverage exists in the first place is what matters. It is the opposite of the usual advice, which pushes whole life on the child from the start.
The mistake I see most
Naming the child directly as the beneficiary instead of the trust. Parents think they are being clear. But that payout becomes an asset the child owns, and it can cut off ODSP or AISH. The insurance part is straightforward. The beneficiary designation is what has to be right.
Do not wait to apply
A lot of families hold off. They want to get healthier first, or sort out the lawyer and the trust before they apply. Both are a mistake if you have a need today.
On “getting healthier first”
No different from any other client. If you have a need today, address it today. Health can change, and waiting for a better rate can mean a condition develops in the meantime, so you apply with more on your file, not less.
On “sorting the trust first”
This can be a significant mistake if something catastrophic happens in between. Insurance protects the risk that exists today. The trust structures how the money is handled later. Put coverage in place now, name the trust once it is drafted.
This is where a broker earns the fee: sizing the coverage to the real need, and knowing which carrier reads your health picture most favourably. If you would rather talk it through than guess, you can get in touch and we will work out the number first, then the structure.
Protecting your child’s benefits: Henson trust and provincial rules
Name a Henson trust as the beneficiary, not your child. That single choice is what keeps a life insurance payout from cutting off income-tested benefits like ODSP, AISH, or BC PWD.
A Henson trust is a fully discretionary trust. The trustee decides if and when money reaches your child, so the funds are not counted as your child’s own asset. Pay the money straight to your child instead, and it usually counts as an asset or income that can reduce or suspend those benefits.
Who to name as beneficiary
Do not name
Your child directly, or the RDSP. A direct payout can count as your child’s own asset and put ODSP, AISH, or PWD at risk.
Consider naming
The Henson trust or its trustee structure, so proceeds are held at the trustee’s discretion and stay outside your child’s assets.
Confirm with a lawyer
The exact beneficiary wording, and whether the trust is set up in your will or during your lifetime. This is what makes the designation actually hold.
The drafting itself is a lawyer’s job. For many families the Henson trust is written into the will and comes into effect after death, and your lawyer should confirm the exact beneficiary wording before the designation is finalized, so proceeds are directed to the trust structure and not paid directly to your child. Choose a trustee you trust completely, since they hold real discretion, and it is common to name a backup. You can read more on how a beneficiary designation interacts with your will before you meet the lawyer.
One tax note: proceeds can also be held in a segregated fund with the trust named as beneficiary, though seg fund withdrawals are treated as chargeable income for benefit purposes. Whether that fits is a conversation for your advisor and estate lawyer together.
Coordinating the payout with an RDSP
The RDSP and life insurance do different jobs, and they work best together. The RDSP builds savings during your lifetime with government help; life insurance drops in a lump sum when you die. One grows slowly with support, the other shows up all at once.
Start with the Disability Tax Credit
Your child must be approved for the Disability Tax Credit (DTC) before an RDSP can even be opened. The DTC is the gateway to the RDSP and to other federal supports, so it is the first paperwork to sort out.
$200,000
Lifetime RDSP contribution limit per beneficiary
Grants + bonds
Government adds matching grants and income-tested bonds, ending the year the beneficiary turns 49
10-year hold
Withdraw too early and recent grants and bonds can be clawed back
Two things to get right so the pieces do not work against each other. Do not name the RDSP as the beneficiary of your policy: direct the proceeds to the Henson trust, and let the trustee decide what to contribute or cover. And mind the timing: a withdrawal can require repaying some or all grants and bonds received in the previous 10 years under the proportional repayment rule, which is why early withdrawals before the beneficiary’s 60s are handled carefully.
RDSP payments themselves do not reduce ODSP, which is part of why the account is so useful alongside coverage. For the current grant, bond, and withdrawal rules, the CRA’s RDSP page is the authoritative source, and the exact numbers are worth confirming with your advisor.
What your lawyer and accountant handle
Some of this plan sits outside insurance, and it is worth knowing who does what so nothing falls through the cracks. I handle the coverage. A disability-focused estate lawyer and an accountant handle the pieces below.
The lawyer
Drafts the Henson trust in your will, sets up powers of attorney or guardianship where capacity is a factor, and can advise on a Lifetime Benefit Trust if an RRSP or RRIF is being left to your child.
The accountant
Handles the Disability Tax Credit claim, the caregiver credits (often claimable retroactively), and the tax treatment of a Qualified Disability Trust once the trust exists.
None of that changes the insurance decision, and none of it should hold it up. Get the coverage in place, then let the lawyer and accountant structure the rest around it. That sequence is the whole point.
Talk it through with a broker
Get the amount right first, then the structure.
As an independent brokerage, we compare life insurance and segregated fund solutions across more than 20 Canadian carriers to size your coverage to your family’s real need and find the carrier that reads your health picture most favourably. No cost to compare.
Call 1-877-654-6119
Serving Ontario, Alberta, British Columbia, Manitoba, Saskatchewan, New Brunswick, and Nova Scotia.
Frequently asked questions
Q1
Does my child’s disability affect my eligibility or price?
Usually not directly. Insurers underwrite you, the parent. Your age, health, lifestyle, coverage amount, and financial justification drive the result, and a child’s diagnosis is generally not rated on your application.
Q2
Should I name my child or a trust as beneficiary?
Name a Henson trust, not your child. A payout made directly to your child can count as their asset and reduce or suspend ODSP, AISH, or BC PWD benefits. A discretionary trust lets a trustee manage the money without affecting eligibility.
Q3
Which policy type works best for this?
Most families start with term, because it buys the most coverage for the least cost during the high-expense years. Permanent or joint last-to-die coverage is added later to fund the trust. No-medical coverage is a bridge if health or time blocks a full application.
Q4
Will a payout reduce ODSP, PWD, or AISH?
A payout made directly to your child can. Funds paid to a properly drafted discretionary trust are generally exempt. Keep the trust as the named beneficiary, not the child or your estate, and confirm provincial rules with a disability-focused lawyer.
Q5
How does this work with an RDSP?
Your child needs Disability Tax Credit approval to open an RDSP. Do not name the RDSP as your policy’s beneficiary. Direct proceeds to the trust and let the trustee decide what to contribute or cover, keeping in mind the 10-year clawback on early RDSP withdrawals.
Q6
Should I wait until the trust is set up before I apply?
No. Insurance protects the risk that exists today. Waiting for the trust to be drafted leaves your family exposed if something happens in between. Put coverage in place now, then name the trust as beneficiary once your lawyer has drafted it.
Q7
How much coverage should I buy?
Start from the need: income to replace, debts to clear, and the long-term cost of supporting your child. Subtract existing savings and benefits. Sizing that number correctly is the first and most important step, and it is worth working through with a broker.
