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Do life insurance policies impact SSI?

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For those who are qualified for SSI, there is a limit to how much income you are allowed to have. Income sources can be anything from a part time job to investments, including some types of life insurance policies. Term life and final expense insurance will not count against you, but most permanent life insurance policies will.

The key to whether your life insurance policy will affect your SSI is whether or not the policy has a cash value. Term life policies do not carry a cash value and are not counted as income because you cannot withdraw or borrow against any portion of the policy. Final expense insurance is a type of permanent coverage, but it does not have a cash value or pay out to your named beneficiaries, making it exempt as well.

Whole and universal life insurance policies are both known for having a cash value that the owner of the policy can borrow against. Since the cash value of those types of policies can be accessed by the person receiving SSI, the amount of the cash value must be declared as savings or income, depending on whether you receive dividends.

One way to avoid having the cash value of a life insurance policy count against you is to name someone else as the owner of the policy. The owner of the policy must have an insurable interest in your life in order to be the owner of the policy, but this includes any grown children as well as some employers and close friends. By naming someone with an insurable interest as the policy owner, the policy is effectively taken out of your possession and cannot be counted against you. If you decide to borrow against the policy, though, you will have to go through the named owner, having them borrow against the policy on your behalf.

answered May 5, 2014 by anonymous
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