Financial outlets like Social Security and life insurance proceeds can be significant sources of assistance for those who are in need of financial assistance, including for medical conditions like cancer. A health scare—especially one that has such a high price tag attached to it—may prompt you to re-examine your financial health, as you strive to make sure you can meet the pressures of mounting medical bills and still protect your financial future, and that of your family. As you work to get your finances in order, you may wonder how your Social Security and life insurance proceeds may impact one another.
Social Security benefits like Supplemental Security Income (SSI) can, in some cases, be affected by your life insurance, but it’s important to first understand the nuances of your insurance policy, as well as your particular SSI profile.
What is SSI?
SSI is a government program that provides payments to seniors (over age 65), as well as those who are disabled. Income and assets are considered in how much SSI benefits an individual can qualify for, which is where the question of Social Security and Life Insurance proceeds comes in.
Are Loans Against My Life Insurance Policy Earned or Unearned Income?
If you have a term life insurance policy, you won’t be affected, as such policies build no cash value. However, if your whole or permanent life insurance has cash value, your eligibility for—and amount of—SSI benefits could be impacted. SSI weighs applicants’ earned and unearned income, and dividends being paid from a life insurance policy’s cash value are considered unearned income. The federal government also views a loan against a life insurance policy as income, so if you are borrowing against your policy, that may impact whether you can receive SSI benefits. Entering into a new life insurance policy after you’ve started receiving SSI benefits is possible, but you must report any earnings—via dividends or a loan—to the government, as it may consider changing your benefit level or eligibility.
Social Security and life insurance proceeds are both important financial avenues, but they do have the potential to impact one another. It’s important to evaluate all of your options and consider your unique situation before making any major financial decisions, as they could impact your long-term financial outlook.
Learn More About Living Benefit Loans
Life Credit Living Benefit Loans allow you to borrow against your death benefit. Take a look at our simple loan process and schedule a loan consultation with one of Life Credit’s professional counselors.