FREQUENTLY ASKED QUESTIONS

Supplemental Security Income (commonly referred to as SSI) is a program offered by the federal government through the Social Security Administration. This program offers income to an estimated 7.7 million people. In order to receive aid from this program, you must be in one of the following categories:

In addition, income and resource limits must also apply in order to qualify for Supplement Security Income. For individuals, assets and resources must not be valued at more than $2,000, and for couples, resources and assets must not be more than $3,000.

With that said, if you carry a permanent life insurance policy, such as whole life or universal life, it’s important to understand if the cash value of your policy will affect your ability to receive Supplement Security Income. Below, we explain what income is taken into consideration when determining if an applicant qualifies for SSI.

Income Considered for SSI

life insurance and ssiIn order to qualify for SSI, both earned and unearned income is taken into consideration.

In terms of earned income, 50 percent of earrings valued at more than $65 a month are exempt, while the first $20 in unearned income a month is exempt. Any other income that is unearned is calculated at 100 percent. Therefore, if you are receiving any amount of money from your life insurance policy, such as dividends or you have taken out a loan against the cash value account, the amount will be considered unearned income toward Supplement Security Income. In other words, any money that you are receiving from your life insurance policy could affect your eligibility for SSI benefits. Furthermore, it could also affect the amount of benefits that you would be eligible to receive.

You are required to report any income that you are receiving from your permanent life insurance policy within 10 days after the start of the month that you begin to receive the funds. Reductions to your benefits will be applied two months later.

Can You Own a Life Insurance Policy if You Receive SSI?

If you are receiving Supplemental Security Income, you can purchase a new life insurance policy. The Social Security Administration does not have the right to interfere with your ability to purchase new life insurance coverage. However, if you are receiving SSI benefits, it is in your best interest to find out how purchasing a new life insurance policy will affect your SSI benefits.

Why should you find out how a new life insurance policy will affect your SSI benefits? Because, as mentioned above, any money that your receive from a permanent life insurance policy, whether it is in dividends or via a loan that you have taken out against the cash value of your policy, can affect your SSI benefits. The moneys received from life insurance are considered unearned income, and they can have a significant impact on your ability to receive benefits through the Social Security Administration.

Supplemental Security Income eligibility, as noted, is based on the current assets and resources that you possess. It is also based on your ability to earn money or otherwise collect money for the cost of living; i.e. – life insurance. As such, you report any life insurance policies that you own when you are applying for SSI benefits. Furthermore, you must disclose any money that you are receiving from your life insurance, even after you start receiving SSI benefits.

Cash Value and SSI

If you have a permanent life insurance policy, the surrender cash value of the policy will more than likely be considered a resource. The reason? – The surrender cash value refers to any money that you would acquire from your life insurance provider if you were to cancel out your policy.

Term Life Insurance and SSI

If you have a term life insurance policy, no matter the value or the death benefit, it will not have any impact on your SSI eligibility or the benefits you receive. Term life insurance does not carry any cash value, and therefore it cannot be considered an asset, as you cannot collect money from it. The only value that a term life insurance policy holds is the death benefit; the money that the insurance provider will pay out to beneficiaries when you pass away.

47 Comments

  1. I left a 5,000.00 policy to my partner in case of my death she is the beneficiary and us on SSI at my death she claims the money will that effect her benefits

    1. Hi Pamela. You can rest easy, life insurance does not affect social security benefits since they are not based on your net worth. They are based on lifetime payments into SSI, and even billionaires are entitled to their SSI benefit.

      1. You have SS and SSI confused. On SSI you report any money, that $5000 will affect her SSI, you can’t have more than 2500 per month in resources including SSI payment. She’ll have to payback SSI payment the month she receives it. If you have 2500 left the next month, you’ll repay that month.too.

  2. My dad’s SSI was just denied because my mom’s life insurance policy exceeded the $3000. Is this allowed?

    1. SSI laws are complex. Please consult an attorney regarding a specific case.

  3. I have Whole term life insurance will it affect my ssidi benefits

    1. It could possibly. It depends on a number of factors, including if you receive benefits such as from a DI rider on the policy.

  4. I’m 46 years old and had a heart attack and mental problems starting in 2011.I still have trouble remembering things.I’ve missed important things in life.I want to be able to leave my 2 children something because I have nothing. I want them to be able to take care of things if I pss away.I don’t want to leave them with a ebt they cannot pay.Can you please turn me to the right place to figure out mu optoions.

    1. You should investigate a guaranteed life insurance policy or final expense insurance. You will likely not qualify for a large policy due to your health.

  5. I receive social security disability and I am 63 years old. I am the beneficiary to my husbands’ term life insurance policy, if he dies, I will receive money from his life insurance, do I have to report this to social security administration?

    1. SSDI does not count any other monies coming in. SSI has $2000 limit.

  6. My mentally impaired son just recently started receiving SSI (two payments). My question is, we were told by SSI that my son could not have insurance policies with a face value of more than $2000 dollars. We have policy in my name as beneficiary with face value $320 today. This policy was started in 2009. We just found out that a grandparent has a paid off policy in my sons name. What can I do?

    1. SSI likely cares about policy ownership, not a policy that he is named beneficiary because they can not control this. Double check with an attorney who specializes in SSI to make sure!

    2. On SSI any ins. money ( lg sum) can go into a special needs trust. SSI has a $2000 a month resource limit, including the SSI payment. It’s a pain, it takes SS 6-9 months to do paperwork, that’s if they don’t forget about it.. I’ve been there. Any over payment they take 10% of SSI payment until it’s paid off. If policy 25,000 put in trust. If policy10,000; the first month received you’ll payback SSI payment until that money is down to $1200. You can’t give it away either. Save receipts, they want them.

  7. In regards to above info. If the policies for my son have beneficiaries other than than my son, is that still considered his income?

    1. I believe that SSI is more concerned with ownership than him being named as a beneficiary.

  8. My husband has 2 whole life Insurance with a cash value of 3,000.00 each and I’m beneficiary of them. He is in a nursing home and on Medicaid . Would having my name change on policies as owner help me keep the value of the insurance

    1. Probably not. You will need to check with an attorney but because you are a spouse it will be difficult to shelter.

  9. I am 43!years old, receive SSD, and my daughters both receive SSI (under me). I have terminal cancer. If I elect to receive an accelerated death benefit of $80K (policy is $100k) would that affect my SSD and/or the SSI received by my daughters?

    1. Accelerated death benefits should not affect your social security, only dividends or payments from the policy.

  10. My mother had term life in the amounts of 5000 and 2000 with me as beneficiary. I am on SSI, will collecting affect my benefits? What if I were to use those funds to pre-pay my rent in our shared apartment?

    1. It should not affect your benefits.

    2. Any money affects SSI over $50. It doesn’t matter what you do with it. SSI is Federal welfare. $2000 a month in resources max including SSI payment. Each month you have that $7000 they will subtract each monthly SSI payment, it takes 6-9 months for paperwork, they call it over payment take 10% out of SSI payment until paid off. If you spent it in 1month, they want to see receipts, you can’t give away either. I paid my electric, cable, Ins. Ect. for a year, Few Costco runs with family/friends..I had receipts. Don’t pay up rent, that’s what SSI check for.

  11. Since January they have been taking almost $60 out of my check I’m drawing from spouse and have I lost my SS because I have a term life plan that I’ve had for many years and it has $4000 cash value. I have desminopathy . I was told I would have to cancell my policy to get my partial SS back . Seems like it wouldn’t matter unless I drawed from it . I dont look at it as money in the bank because if I do take any I have to pay it back or they take it out of my policy value. Either way they get it back . I contacted a lawyer but was told it’s the law . Any advice would be appreciated I’ve still got my insurance trying to find somewhere that I dont have to pay 10x what I’m paying now …Thank you

    1. Andrew @ LifeAnt

      Hi Gail,
      It’s true that if you take out cash value from your whole life policy, then the company will reduce your death benefit by the amount that you took out. If you can’t collect SS anymore due to the policy, then perhaps you could take out that $4,000 of cash value and use that, and once it’s used then perhaps you would be eligible to go back on SS, but you should verify that with the SSA before you do anything.

  12. All cities have free legal advice, call any senior advocacy group. It’s a free 30 min from an atty that has expertise in your interest.

  13. My mom just received a payoff from a life insurance policy from her brother. She is on social security. Is this going to affect her benefits?

  14. Melissa Catherman

    Can Social Security SSI I receive and I got benefits from my father passing away it was under $5,000 will it impact my Social Security my SSI payments

  15. I have been trying to get my SSI for a few years now.They used to not say that if you have a life insurance of say 5000.00 that they would not use the 5000.00 against you,but just what the cash value is.Why have they changed the rules about that and that if you owned more than 1 vehicle that they would use the value of the oldest vehicle you own.Also that you weren’t allowed to have a bank account if you do get SSI.Thats totally ridiculous.

    1. I assume you mean SSI disability, or SSDI, which is different than normal social security. The government periodically changes rules, and typically to the benefit of paying less money out less often. The reason is that the Social Security program is underfunded for the expected liabilities. They simply only have so much money. It may be to your benefit to surrender the policy, or it may not. You should enlist the help of an attorney who specializes in disability claims.

      1. No I mean SSI.I didn’t have enough work credits to apply for SSD.I can get SSI no problem except what I talked about.I would never turn in my life insurance because it would be the only way my children could pay for my burial and everything.I have already talked to SSA.gov about SSD and they said the same thing about the work credits.You have to have 40 and I only have 21 so that solves that.

        1. Andrew @ LifeAnt

          Hi Lorene,
          It’s a difficult situation for you, no doubt. Federal programs exist for very specific purposes, and most of SS is based on helping people with absolutely no assets or money. Since you do have the life insurance policy and don’t want to cancel it, then perhaps you could look at other federal aid programs that might be able to offer some help.

  16. My husband passed away. I had a 100;000. Life insurance policy on him. Is

    Does this affect my survivor benefits being taxed?

    1. There should not be a tax, but you should consult with a CPA

  17. My mom is in nursing home paralyzed from a stroke. She is receiving SSI benefits. She Has A Life Insurance Policy With A Cash Value of Around $3000. I am the OWNER on the policy. She transferred ownership to me long time ago. But her name still shows INSURED. Is this still considered AN ASSET that might affect her benefits?

    1. It is an asset for the owner not the insured. You should be fine.

  18. Requita williams

    My son receives SSI benefits, and I have a whole life insurance policy for him will this effect his benefits?

  19. i have a whole life insurance policy on my mother for her final expences she is the owner but i pay it. i borrowed against it a few months ago. will this affect her SSI?

    1. Andrew @ LifeAnt

      Hi Donna,
      If the policy didn’t affect her SSI in the past, then it likely won’t now either. But if she is the owner, then you shouldn’t have been able to borrow against her policy unless she did it for you. Also, the amount that you took out will reduce the death benefit by the same amount that you took out, and will remain that way unless you pay back the money.

  20. my moms son died he left her a life insurance check or policy for 15,000 she receives ssi will that affect her ssi or payments

  21. Tom, I am an insurance agent and I have some clients that have disabled children. The parent would like to purchase a life policy so that the child would receive a death benefit to maintain their child’s quality of life. Can the beneficiary of the life insurance policy be a special needs trust for the child? And will the proceeds from the life insurance death benefit affect the childs SSI benefit?

    1. Steve the policy can definitely fund a trust for the benefit of the child. The SSI question is a good one but unfortunately complex. It can negatively affect SSI benefits. There are some loopholes, such as paying for food and shelter directly vs paying out cash, which can cap the reduction at 1/3 of the total benefit. You are best served to speak with an attorney about the specifics of the situation.

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