Life Insurance For Ssi Recipients: Is It Possible?

If you are receiving Supplemental Security Income (SSI) benefits, you might be wondering if you can buy a life insurance policy. The short answer is yes, because the Social Security Administration doesn't have the right to interfere with your ability to purchase life insurance. However, it's important to know how purchasing life insurance can affect your SSI benefits, as well as the different types of life insurance policies available to you.

Life insurance and SSI eligibility

Supplemental Security Income (SSI) is a federal program that offers income to individuals who fall into one of three categories: disabled, blind, or aged (65 years or older). To qualify for SSI, certain income and resource limits must be met. For individuals, assets and resources must not exceed $2,000 in value, while for couples, the limit is $3,000.

Life insurance policies can impact SSI eligibility and benefits, but it depends on the type of policy and the payout amount. Here's what you need to know about how life insurance and SSI eligibility are connected:

Term Life Insurance and SSI

Term life insurance typically does not impact SSI eligibility or benefits. Term life insurance doesn't carry a cash value, so it's not considered an asset. Additionally, you usually can't collect money from it. Therefore, it won't affect your SSI benefits.

Permanent Life Insurance and SSI

Permanent life insurance policies, such as whole life or universal life, can affect your SSI eligibility and benefits. The cash value of these policies is considered a resource and can be counted towards the SSI resource limit. If the cash value pushes you over the SSI resource threshold of $2,000 for individuals or $3,000 for couples, your SSI benefits may be reduced or discontinued until your assets fall below the limit again.

Life Insurance Payouts and SSI

Receiving a life insurance payout while on SSI can also impact your benefits. A life insurance payout is considered unearned income and is counted as a countable asset. If the payout amount exceeds the SSI resource limit, your benefits may be decreased or terminated until your assets fall below the limit.

Buying Life Insurance While on SSI

If you are receiving SSI benefits, you can still purchase a life insurance policy. The Social Security Administration does not have the right to interfere with your ability to do so. However, it is important to understand how buying a new life insurance policy, especially a permanent life insurance policy, will affect your SSI benefits. Any money received from a permanent life insurance policy, such as dividends or loans against the cash value, is considered unearned income and can impact your SSI eligibility and benefit amount.

In summary, while individuals on SSI can own life insurance policies, it's important to carefully consider the type of policy and its potential impact on SSI eligibility and benefits. Term life insurance policies are generally safe, while permanent life insurance policies and life insurance payouts can affect SSI benefits due to their cash value component. Always consult a financial advisor or tax attorney to discuss your specific situation.

Life insurance and SSI benefits

Supplemental Security Income (SSI) is a federal program that provides income to individuals who fall into one of three categories: disabled, blind, or aged (65 years or older). The Social Security Administration (SSA) administers this program, and in 2018, around 67.9 million people received benefits under it.

If you are receiving SSI benefits, you may be wondering if you can also buy a life insurance policy. The short answer is yes. The SSA does not have the right to prevent you from purchasing life insurance. However, it is essential to understand how buying life insurance can affect your SSI benefits.

Income, age, and disability

Income, age, and disability are the three main factors that can impact your SSI benefits when purchasing life insurance.

Income and SSI benefits

Underwriters consider life insurance as "income replacement," and they generally factor in SSI retirement income. If you are not working due to disability or retirement, this will be a factor in both your health and financial qualification and justification. Most reinsurers will add a rating if you are on SSI disability.

Age and SSI benefits

Age can also affect your benefits. If you are collecting SSI based on retirement age, it will often be included in income calculations. The death benefit can also be evaluated based on factors other than income, such as property ownership or total asset calculations.

If you are near retirement, it is advisable to apply for SSI benefits while still employed. This will usually give you more options and longer limits.

Disability and SSI benefits

In 2018, 86% of SSI recipients received payments due to disability or blindness. Any money received from a permanent life insurance policy, such as dividends or loans against the policy's cash value, can impact your SSI benefits. SSI is based on several factors, including your current assets, resources, and ability to earn or collect money for the cost of living.

Cash value and SSI

If you have a permanent life insurance policy, its surrender cash value (the money you would receive if you cancelled your policy) will likely be considered a resource. This can affect your SSI benefits, as it is considered unearned income.

Term life insurance and SSI

On the other hand, term life insurance typically does not impact SSI eligibility or benefits since it does not carry any cash value and, therefore, cannot be considered an asset.

Life insurance payout and SSI

If you are receiving SSI benefits, a life insurance payout that exceeds $2,000 for an individual or $3,000 for a couple could result in your benefits being reduced or terminated until your assets fall below the SSI resource threshold again. This is because SSI has strict asset limitations, and the payout is considered a countable asset.

Special considerations

It is important to note that the rules and regulations regarding life insurance and SSI benefits can be complex and subject to change. Consult a tax attorney or financial advisor to discuss your specific situation and ensure you understand the potential impact on your benefits.

Term life insurance and SSI

Term life insurance policies typically do not impact a person's SSI eligibility or benefits. This is because term life insurance does not carry any cash value and therefore cannot be considered an asset. In addition, beneficiaries cannot collect money from the policy, and the only value it holds is the death benefit paid out when the insured person passes away.

Life insurance is considered a resource if it has a cash surrender value. For example, burial insurance and most kinds of term insurance have no cash surrender value and are therefore not considered resources. However, if a life insurance policy has a cash value and is owned by the individual or their spouse, it is excluded from countable resources if the total face value of all policies owned on any one person is not more than $1,500. If the total face value exceeds $1,500, then the total cash surrender value of the insurance is counted as a resource unless it is designated as funds set aside for burial.

The SSI program has strict asset limitations, and eligibility is based on an individual's current assets, resources, and ability to earn an income. Therefore, it is important for individuals receiving SSI benefits to understand how purchasing a new life insurance policy or receiving a payout from an existing policy may affect their benefits. While term life insurance policies typically do not impact SSI, permanent life insurance policies with a cash value component can increase the policy's face value over time and may be considered a countable asset.

It is worth noting that the death benefit paid out to a beneficiary of a life insurance policy is not considered income for SSI purposes. However, if the beneficiary receives a lump sum payment, such as through a viatical settlement, it could be considered income and impact SSI eligibility. As such, it is recommended to consult with a financial advisor or an attorney specializing in SSI to understand how a life insurance policy may impact an individual's SSI eligibility and benefits.

Permanent life insurance and SSI

If you receive Supplemental Security Income (SSI) benefits, you can still buy a life insurance policy. This is because the Social Security Administration doesn't have the right to interfere with your ability to purchase life insurance. However, there are some important considerations when it comes to permanent life insurance and SSI.

SSI is a needs-based program with strict asset limitations, and to qualify, your countable resources can't be more than $2,000 as an individual or $3,000 as a couple. While your home, burial plots, and life insurance policies with a combined face value of less than $1,500 are not counted towards the resource limit, a life insurance payout is considered a countable asset. This means that a life insurance payout that exceeds $2,000 would put you above the individual asset limit, resulting in your SSI benefits being reduced or terminated until your assets fall below the limit again.

Permanent life insurance policies have a cash value component that can increase the policy's face value over time. This cash value is considered a resource if it has a cash surrender value, meaning it can be considered an asset. If the total face value of your life insurance policies, including the cash surrender value, exceeds $1,500, then the total cash surrender value counts as a resource and may impact your SSI benefits. Therefore, it's important to carefully consider the face value and cash value of any permanent life insurance policy you're considering while on SSI.

Additionally, any money received from a permanent life insurance policy, such as dividends or loans taken out against the cash value, is considered a countable resource and can affect your SSI benefits. This is because SSI is based on multiple factors, including your current assets, resources, and ability to earn or otherwise collect money for the cost of living. As such, it's crucial to understand how your permanent life insurance policy may impact your SSI benefits and consult a tax attorney or financial advisor for personalised advice.

SSI income and resource limits

To be eligible for Supplemental Security Income (SSI), you must fall within at least one of three categories: you're disabled, blind, or aged (65 years or older). Additionally, your income and resources are considered when determining eligibility.

SSI is a needs-based program, so your countable resources must not be worth more than $2,000 for an individual or $3,000 for a couple. This is called the resource limit.

Countable resources are the things you own that count toward the resource limit. Many things you own do not count, such as:

• The home you live in and the land it's on
• One vehicle, regardless of value, if you or a household member use it for transportation
• Household goods and personal effects
• Burial funds of up to $1,500 each for you and your spouse's burial expenses
• Life insurance policies with a combined face value of $1,500 or less
• Burial plots or spaces for you or your immediate family

If you have a permanent life insurance policy, the cash surrender value of the policy will likely be considered a resource. This type of cash value refers to any money you'd receive from your life insurance provider if you were to cancel your policy. On the other hand, term life insurance typically doesn't carry any cash value and can't be considered an asset.

In terms of income, you can't buy unlimited life insurance just because you can afford it. Underwriters consider life insurance as "income replacement" and generally factor SSI retirement income into the equation. If you're not working due to disability or retirement, this will factor into your health and financial qualification.

Frequently asked questions