Can a Cash Value on a Life Insurance Policy Affect My SSI?

by Linda Richard ; Updated July 27, 2017

Supplemental Security Income is a federal program recognized by its initials, SSI. SSI provides income to 7.7 million individuals who qualify in one of three categories: blind, disabled or aged. SSI recipients must also qualify by income and resources limits, with resources or assets not to exceed $2,000 for individuals or $3,000 for couples.

Resources Not Counted

SSI allows ownership of a home and lot, car, household goods, a burial plot, burial insurance up to $1,500 and life insurance up to $1,500. If the total of all life insurance policies is less than $1,500, they will not affect your SSI benefits. This is face value, not cash surrender value. If the face value is below the limit, the Pennsylvania Department of Welfare indicates that you do not have to look at cash surrender value.

Resources Counted

Resources that count for SSI eligibility review include cash, stocks, bonds and other assets of value. If you have few liquid assets, such as cash or bank accounts, you may apply excess life insurance to the $2,000 allowed in countable resources. The maximum life insurance allowed would be $3,500 -- $1,500 exempt resources and $2,000 in countable resources -- but you could not have any other resources.

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Income

Income that counts for SSI includes earned and unearned income. Earned income calculations subtract the first $65 and 50 percent of any income for the month in excess of the $65, so earned income calculations are at 50 percent of earnings over $65. Unearned income exempts the first $20. All other unearned income calculations apply at 100 percent. If you receive dividends or any income from a life insurance policy, that is unearned income for SSI and may affect your eligibility or your benefits, or may affect your benefit amount. You must report income within 10 days after the month you receive it, and subtractions to benefits occur two months later.

Solutions

Because SSI allows a burial fund under the guidelines, you may designate the life insurance policy as burial funds and qualify for SSI. You may also borrow against the life insurance policy and decrease the cash value to comply with the limits. You can sell excess resources to meet the SSI guidelines. If your life insurance is in excess of the $1,500 limit and you would otherwise qualify for SSI, cashing in the life insurance may be the solution. You may be able to convert to a policy with no cash value or surrender the policy, and use the proceeds for a burial reserve. Discuss possibilities with Social Security and your insurance agent.

About the Author

Linda Richard has been a legal writer and antiques appraiser for more than 25 years, and has been writing online for more than 12 years. Richard holds a bachelor's degree in English and business administration. She has operated a small business for more than 20 years. She and her husband enjoy remodeling old houses and are currently working on a 1970s home.

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