Can You Have Life Insurance on Social Security?

Individuals receiving Social Security benefits often wonder how obtaining life insurance might affect their financial situation. This article aims to clarify the interplay between various Social Security programs and life insurance policies. Understanding these dynamics is important for making informed decisions about financial planning.

Understanding Life Insurance Types

Life insurance policies are generally categorized into two main types: term life insurance and permanent life insurance.

Term life insurance provides coverage for a specific period (e.g., 10, 20, or 30 years). If the insured dies within this term, beneficiaries receive a death benefit. Term policies do not accumulate a cash value.

Permanent life insurance offers lifelong coverage, provided premiums are paid. This category includes whole life and universal life policies. A key feature is its cash value component, which grows tax-deferred and can be accessed by the policyholder through withdrawals or loans.

Impact on Supplemental Security Income

Supplemental Security Income (SSI) is a needs-based program providing monthly payments to individuals who are aged, blind, or disabled and have limited income and resources.

The cash value of a permanent life insurance policy is a countable resource for SSI eligibility. If the cash value exceeds certain limits, it can affect an individual’s eligibility for benefits.

For 2025, the SSI resource limit is $2,000 for an individual and $3,000 for a couple. If the total face value of all life insurance policies an individual owns exceeds $1,500, the entire cash surrender value of those policies is counted as a resource. Policies with a face value of $1,500 or less are excluded from resource calculations.

SSI recipients must report any life insurance policies to the Social Security Administration (SSA). Failure to accurately report resources, including life insurance cash value, can lead to benefit ineligibility. Dividends or money from policy loans are also countable resources if held into the following month.

Impact on Other Social Security Benefits

Other Social Security programs, such as Social Security Disability Insurance (SSDI), Social Security Retirement benefits, and Social Security Survivor benefits, are not needs-based. These benefits are earned through a worker’s contributions to the Social Security system over their working lifetime. Therefore, the rules regarding resource limits that apply to SSI do not apply to these programs.

Owning a life insurance policy, with or without cash value, does not affect eligibility or amount for Social Security Retirement or Survivor benefits. SSDI benefits are based on work history and disability status, not assets. A life insurance payout to a beneficiary is considered a death benefit, not earned income, and does not reduce these Social Security benefits.

However, if an SSDI recipient accesses living benefits from their life insurance policy, such as accelerated death benefits or policy loans, this could affect their benefits. While the death benefit itself does not count as income, drawing on the cash value or receiving regular payments from an annuity funded by a life insurance payout can be considered income. This could lead to a reduction in SSDI benefits, especially if the individual has not reached retirement age.

Getting Life Insurance While Receiving Social Security

Individuals receiving Social Security benefits can purchase life insurance, as their benefit status does not disqualify them. Life insurance companies assess applicants based on underwriting factors to determine eligibility and premium rates. These factors include age, health status, medical history, and lifestyle choices.

Insurers also consider an applicant’s financial situation to ensure the requested coverage aligns with their income. While Social Security benefits are not directly factored into income calculations for policy limits, an individual’s ability to pay premiums is always a consideration. Receiving non-needs-based benefits like Social Security Retirement or SSDI does not create an obstacle to obtaining life insurance, provided other underwriting criteria are met.