If you’re receiving SSI or Supplemental Security Income, it’s important to know how financial planning affects those investments. When it comes to life insurance’s impact on SSI benefits, it all depends on several factors. Small changes can completely alter receivable benefits, making it crucial that you understand the effects life insurance can have on your investment.
What Is SSI?
Often confused with the general term of Social Security benefits, Supplemental Security Income is its own entity providing unique benefits to Americans. The resource is funded via tax revenue and generally goes toward providing for those with the most need in the following categories: Senior citizens, blind individuals, and those living with select disabilities. Just because you fall into these categories does not ensure coverage but instead is reserved for those presenting the most need.
The Primary Types of SSI
There are two main types of SSI available to Americans. One is disability-based assistance, and the other is retirement.
People who are eligible for disability SSI are those living with a disability that directly impacts their ability to work or perform their original job function. This type of insurance is not suitable for those living with a short-term or partial disability. As a general rule of thumb, the illness must last for a minimum of one year or be terminal.
Earning retirement SSI is less subjective than disability SSI. Typically, retirement SSI kicks in once you’ve reached the age of 65. You also have to meet the minimum income and demonstrated need requirements. Remember, there is no fee to apply, and anyone can apply at any time. If you’ve read through the eligibility markers and believe you’re eligible, you can go ahead and apply.
When Life Insurance Puts Your SSI in Jeopardy
With an understanding of SSI, including the different types, you’ll want to consider what keeps you remaining eligible. One common cause of ineligibility is life insurance policies.
Purchasing a New Policy
If you do not already have a life insurance policy, you are permitted to purchase one, even if you are collecting SSI benefits. The primary concern for having a life insurance policy and SSI payments is that SSI is only for those demonstrating extreme need. That means that the Social Security Administration rescind benefits if you exceed the permitted maximum income, including your life insurance policy’s face value.
In the case of whole policies, they usually have a cash value component that continues to grow over time. The value of that policy, though something you’re not actively working toward growing, can make you ineligible for benefits.
Life Insurance Payout & SSI
In the case of a death benefit, beneficiaries usually do not need to worry about their payout while receiving SSI benefits. However, it is crucial that you verify the impact of the benefits or potential benefits with the SSI department to ensure you are eligible for benefits as a policyholder and your loved ones are eligible for SSI benefits as beneficiaries on your plan.
The Bottom Line
The answer to whether you can carry a life insurance policy while maintaining SSI benefits is not straightforward. The process and approval depend on the fine print as detailed by the SSI department. To ensure compliance and no lapse in coverage, it’s important to speak with a qualified professional to understand your options.