If you receive Supplemental Security Income benefits, you might be wondering – can I buy a life insurance policy?
The short answer is yes1, because the Social Security Administration doesn’t have the right to interfere with your ability to purchase life insurance.
Supplemental Security Income (SSI) is a program offered by the federal government through the Social Security Administration (SSA). In 2018, 67.9 million people received benefits from programs administered by them.3 To qualify for these benefits, you must fall within at least one of three categories – you’re disabled, blind, or aged (65 years or older).3
How Will Your SSI Benefits be Affected?
The three main factors that could affect your SSI benefits when purchasing a life insurance policy are income, age, and disability.3 They can all affect your benefits in different ways, so it’s important to learn about each one.
Income and SSI Benefits
When it comes to your income, you can’t just buy as much life insurance as you can afford. Underwriters look at life insurance as “income replacement,” and generally factor Supplemental Security Income into the equation. Almost all companies that have income requirements will review SSI retirement income.
Additionally, if you’re not working due to disability or retirement, this factors into both your health and financial qualification and justification. Most reinsurers will add a rating if you’re on SSI disability.
Age and SSI Benefits
Additionally, your age can have an effect on your benefits. Nearly nine out of ten individuals age 65 and older receive SSI benefits.2 If you collect Supplemental Security Income based on retirement age, it will often be used as part of the income calculations. It varies by product and company as to if a weighting is included for SSI benefits. Also, the death benefit can use evaluations not only based on income, such as property ownership, or total asset calculations.
If you’re near retirement, it would be helpful to apply for SSI benefits while you’re still working. If you look for benefits when you’re still employed, you’ll typically have more companies to choose from and longer limits. If you’re already retired, you’ll usually be limited to how much life insurance you can receive, with a few exceptions.1
Disability and SSI Benefits
Lastly, disability is another factor that could affect your SSI benefits. In 2018, 86% of SSI recipients received payments because of disability or blindness.3 Altogether, disabled workers and their dependents account for 14.5% of total benefits paid.3
Any money that you receive from a permanent life insurance policy, whether it’s from dividends or from a loan that you’ve taken out against the cash value of your policy, can affect your SSI benefits. Multiple factors that Supplemental Security Income is based on include your currents assets and resources that you possess, as well as your ability to earn money or otherwise collect money for the cost of living; for example, through life insurance.
Cash Value and Supplemental Security Income
If you have a permanent life insurance policy, the surrender cash value of the policy will most likely be considered a resource. This type of cash value refers to any money you’d acquire from your life insurance provider if you were to cancel out your policy.1
Term Life Insurance and Supplemental Security Income
On the other hand, if you have a term life insurance policy, it typically shouldn’t impact your SSI eligibility or benefits.2 Since term life insurance typically doesn’t carry any cash value,4 it can’t be considered an asset. Also, you usually can’t collect money from it. To receive more information about Supplemental Security Income, you should contact a licensed insurance agent.
- NAIC.org, A Shopper’s Guide to Long-Term Care Insurance, 2019
- SSA.gov, Fact Sheet Social Security, 2019
- SSA.gov, Fast Facts & Figures About Social Security, 2019, 2019
- TDI.Texas.gov, Understanding Life Insurance, 2019
Categories: Insurance, Life Insurance