Does Life Insurance Affect SSI Eligibility?

Supplemental Security Income (SSI) is a federal program designed to provide financial assistance to aged, blind, and disabled individuals who have limited income and resources. This needs-based program helps cover basic needs. Understanding how your assets, including life insurance, are assessed is important for SSI eligibility.

SSI Resource Limits and Eligibility

The Social Security Administration (SSA) defines “resources” as cash or any assets an individual owns and could convert to cash for their support. This includes money in bank accounts, stocks, mutual funds, land, vehicles, and certain types of life insurance. These resources are evaluated to ensure SSI benefits are directed to those with the most significant financial need.

For SSI eligibility, there are strict limits on the total value of countable resources an individual can possess. An individual’s countable resources generally cannot exceed $2,000, while a couple’s limit is $3,000. Exceeding these limits can lead to ineligibility. Not all assets are counted towards these limits, as some are specifically excluded.

Life Insurance and Resource Calculation

The type of life insurance policy an individual owns directly influences whether it is counted as a resource for SSI eligibility purposes. Different policies have varying structures that impact their assessment.

Term life insurance policies typically provide coverage for a specific period and do not accumulate cash value. Since these policies lack a cash surrender value, they are generally not counted as a resource for SSI purposes.

In contrast, permanent life insurance policies, such as whole life, universal life, and variable life insurance, are designed to accumulate a cash surrender value over time. This cash surrender value represents the amount of money the policyholder would receive if they chose to terminate or “cash out” the policy before the insured event occurs. The SSA generally considers this cash surrender value as a countable resource. This accumulated value can impact an individual’s ability to meet the SSI resource limits.

Exemptions and Special Considerations

While cash value life insurance policies are generally considered resources, specific rules and exemptions exist that can prevent them from counting towards SSI resource limits. Policy ownership is a factor, as only policies owned by the SSI applicant or recipient are considered their resource.

One exemption applies if the total face value of all life insurance policies owned by an individual on any one person is $1,500 or less. In such cases, the cash surrender value of these policies is not counted as a resource. If the combined face value of all policies exceeds $1,500, the entire cash surrender value becomes a countable resource.

Up to $1,500 can be excluded from countable resources if specifically designated for burial. This burial funds exclusion can include the cash value of life insurance policies that have been irrevocably assigned for this purpose. The $1,500 burial fund exclusion is reduced by the face value of any life insurance policy already excluded under the $1,500 face value exemption.

SSI recipients should promptly report any changes to their life insurance policies, such as purchasing a new policy, cashing out an existing one, or irrevocably assigning a policy for burial expenses. Such changes can directly affect resource calculations and SSI eligibility.