Haris Ashley
Life insurance is a resource if it has a cash surrender value. For instance, most term insurance and burial insurance have no cash surrender value and are therefore not considered resources. However, if life insurance has a cash surrender value, it can be excluded from countable resources if the total face value of all policies owned by an individual on another person is $1,500 or less. This threshold is crucial when it comes to government benefits, as certain programs, such as the Supplemental Security Income (SSI) program, have strict asset limitations. If an individual's countable resources exceed the SSI limit of $2,000, their benefits may be reduced or terminated until their assets fall below the limit again. Thus, a life insurance payout that pushes an individual's assets over this threshold could impact their SSI disability benefits.
| Characteristics | Values |
|---|---|
| Does OPM life insurance affect SSI disability? | If you're collecting Social Security disability benefits, receiving a life insurance policy payout or taking out a loan against your own policy's cash value can impact your Social Security benefit amount. It may even put your Social Security benefits in jeopardy. |
| Life insurance and SSI | The SSI program is the Social Security program available to people with disabilities. The SSI has strict asset limitations and is considered a needs-based program, so if your countable resources exceed SSI limits, you may find your benefits cut or discontinued. |
| Qualifying for SSI | Your countable resources can't be more than $2,000 as an individual or $3,000 as a couple. |
| Assets that count towards the SSI limit | Many assets don't typically count toward the resource limit (such as your home, burial plots, and life insurance policies you own with a combined face value of less than $1,500). |
| Life insurance payout and SSI | A life insurance payout is considered a countable asset and may easily push you over the threshold. A life insurance payout that exceeds $2,000 would put you above the individual asset limit, resulting in your benefits being decreased or even terminated until your assets fall below the limit again. |
| Can you have life insurance while on SSI? | Yes, but in most cases, you can only own life insurance policies with a combined face value of $1,500 or less to remain eligible for SSI. |
| Life insurance dividends or loans and SSI | Money collected via permanent life insurance dividends or a life insurance loan would be considered a countable resource. Depending on the amount, using these features could result in your SSI benefit amount being decreased or discontinued. |
What You'll Learn
Life insurance and SSI
Life insurance policies are considered a resource if they have a cash surrender value. Burial insurance and most types of term insurance, for instance, do not have a cash surrender value and are therefore not considered resources. On the other hand, if you own a life insurance policy with a cash value, it is essential to understand how it may impact your SSI benefits.
To qualify for SSI, your countable resources must not exceed certain limits: $2,000 for an individual and $3,000 for a couple. Life insurance policies with a combined face value of $1,500 or less are not counted towards these limits. However, if the total face value of your life insurance policies exceeds $1,500, the excess amount is considered a countable resource. This means that a life insurance payout could push you over the SSI resource threshold, potentially resulting in a reduction or discontinuation of your benefits until your assets fall back below the limit.
It is important to note that permanent life insurance policies often have a cash value component that can increase over time, while term life insurance policies typically maintain the same face value throughout the term as long as premiums are paid on time. Therefore, owning permanent life insurance policies with dividend payouts or taking out loans against your policy's cash value could impact your SSI benefits.
In summary, while it is possible to have life insurance while on SSI, careful consideration and management of your life insurance policies are necessary to ensure compliance with SSI eligibility requirements and to avoid any negative impact on your benefits.
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Life insurance payout and Social Security benefit
Life insurance policies can affect Social Security benefits, depending on the type of benefits being received. If you are receiving Social Security retirement benefits, a life insurance payout will not impact your benefits. This is because life insurance payouts are considered unearned income and do not factor into the benefit amount.
However, if you are collecting Social Security disability benefits through the Supplemental Security Income (SSI) program, life insurance can affect your benefit amount. SSI has strict asset limitations, and if your countable resources exceed these limits, your benefits may be reduced or discontinued. For individuals, assets and resources must not be valued at more than $2,000, and for couples, the limit is $3,000. While certain assets, such as your home and burial plots, are typically exempt from this limit, a life insurance payout is considered a countable asset. Therefore, a life insurance payout that exceeds $2,000 for an individual or $3,000 for a couple could result in a reduction or discontinuation of SSI benefits until your assets fall below the limit again.
It is important to note that the specific impact of a life insurance payout on SSI benefits can vary depending on individual circumstances. Additionally, the rules and regulations regarding Social Security benefits can be complex, and it is always recommended to consult with a tax attorney or financial advisor to discuss your specific situation.
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Life insurance policy and SSI eligibility
Life insurance policies can affect your eligibility for SSI disability benefits. SSI, or Supplemental Security Income, is a needs-based program with strict asset limitations. If you are receiving SSI, your countable resources cannot exceed $2,000 as an individual or $3,000 as a couple.
Life insurance policies with a combined face value of $1,500 or less are typically not counted towards the resource limit. However, if you own a life insurance policy with a cash surrender value, it may be considered a countable resource. In this case, if the total face value of all policies owned on any one person exceeds $1,500, the total cash surrender value counts as a resource unless it is designated as funds set aside for burial.
If you are collecting SSI and receive a life insurance payout, this would be considered a countable asset and may push you over the SSI resource threshold. A life insurance payout that exceeds $2,000 would put you above the individual asset limit, resulting in your benefits being decreased or terminated until your assets fall below the limit again.
It is important to note that permanent life insurance types have a cash value component that can increase the policy's face value over time, while term life policies generally maintain the same face value as long as premiums are paid on time. Therefore, it is crucial to carefully consider the type of life insurance policy you choose and how it may impact your SSI eligibility.
Additionally, if you are enrolled in the Federal Employees' Group Life Insurance (FEGLI) program, you may be able to keep your basic life insurance benefits after retiring, provided you meet certain conditions, including maintaining coverage for the five years preceding retirement and ensuring annuity payments start within 30 days.
It is always recommended to consult with a financial advisor or tax attorney to discuss the specifics of your situation and how a life insurance policy may affect your SSI eligibility.
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Life insurance and FEGLI coverage
The Federal Employees' Group Life Insurance (FEGLI) Program was established on August 29, 1954, and is the largest group life insurance program in the world, covering over 4 million federal employees, retirees, and their family members. Most employees are eligible for FEGLI coverage, which provides group term life insurance. This means it does not build up any cash value or paid-up value.
FEGLI consists of Basic life insurance coverage and three options for Optional insurance. If you are a new federal employee, you are typically automatically covered by Basic life insurance, and your payroll office deducts premiums from your paycheck unless you waive this coverage. The Basic insurance cost is shared between the employee and the government—the employee pays 2/3 of the total cost, while the government pays 1/3.
In addition to Basic coverage, there are three forms of Optional insurance that can be elected. However, to be eligible for any of the Optional insurance, you must first have Basic insurance. Unlike Basic insurance, enrollment in Optional insurance is not automatic—you must actively elect the options you want. You must elect the types of optional insurance within 31 days of becoming eligible. You pay the full cost of Optional insurance, and the price depends on your age.
You may decrease FEGLI coverage at any time, but to make a change, you must complete an SF 2817, Life Insurance Election form.
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Life insurance and FEDVIP coverage
Life Insurance Coverage
Life insurance is a crucial financial safety net for loved ones in the event of an individual's death. It provides financial assistance to help beneficiaries cope with the loss of income, cover expenses, and maintain their standard of living. Life insurance policies typically offer a death benefit, which is a lump sum or periodic payment made to the designated beneficiaries. The availability and specifics of life insurance can vary based on employment status and the insurance provider.
FEDVIP Coverage
The Federal Employee Dental and Vision Benefits Enhancement Act of 2004 paved the way for the Federal Employees Dental and Vision Insurance Program (FEDVIP). FEDVIP is a voluntary benefit program that offers separate vision and dental coverage policies. It is available to federal employees, retirees, and their eligible family members. FEDVIP allows participants to purchase dental and vision insurance on a group basis, resulting in competitive premiums and no pre-existing condition limitations.
Enrollment and Eligibility for FEDVIP
Eligible individuals can enroll in FEDVIP during the annual Federal Benefits Open Season, typically in November and December. New and newly eligible employees have a 60-day window to enroll after becoming eligible. Most federal employees who are eligible for Federal Employees Health Benefits (FEHB) program coverage can also opt for FEDVIP. However, temporary employees and those working on seasonal or intermittent schedules are not eligible for FEDVIP, even if they qualify for FEHB.
FEDVIP offers three types of enrollment: Self Only, Self Plus One, and Self and Family. The "Self Plus One" option allows coverage for the enrollee and one eligible family member, while the "Self and Family" option covers the enrollee and all eligible family members. Eligible family members typically include a spouse and unmarried dependent children under specific age limits.
Life Insurance and FEDVIP Interaction
In summary, life insurance and FEDVIP coverage each play distinct roles in providing financial security and health benefits. By understanding their features and eligibility requirements, individuals can make informed decisions about their protection needs and those of their families.
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Frequently asked questions
Yes, if you have a disability and use the Supplemental Security Income (SSI) program, life insurance can affect your Social Security benefit.
The Supplemental Security Income (SSI) program is the Social Security program available to people with disabilities. The SSI has strict asset limitations and is considered a needs-based program.
To qualify for SSI, your countable resources can't be more than $2,000 as an individual or $3,000 as a couple.
If your countable resources exceed SSI limits, your benefits may be cut or discontinued.
