Will Life Insurance Affect My Social Security Disability Claim?

July 3, 2024

“As is often the case with Social Security Disability, whether a life insurance policy will affect your claim depends on which disability program you are applying for,” notes Nash Disability attorney Dan Rosen.

Social Security runs two disability programs: Social Security Disability Insurance (which is known as SSDI) and Supplemental Security Income (commonly referred to as SSI).

SSDI pays benefits to you and certain members of your family if you have a disability and you worked long enough and paid Social Security taxes recently enough. SSI, on the other hand, is based on financial need. The Social Security Administration (SSA) says, “It is designed to help aged, blind, and disabled people, who have little or no income.” (For more on this subject read our blog post “Why Do I Qualify For SSI, But Not For SSDI?)

“Many clients think that assets will affect their SSDI, when in truth, almost no assets affect SSDI,” Rosen points out. “Qualifying for SSDI is based on your inability to work, and your benefits payment is based on your earnings before you developed a disability. SSDI payments are not affected by having a house, a car, money in the bank, or owning other possessions.”

“On the other hand, many SSI clients are surprised to learn that assets do affect their benefits. SSI is a ‘benefit of last resort,’ meaning that an individual must use of all other available benefits and nearly all assets before SSI kicks in,” Rosen says.

To be eligible for SSI, your assets must be less than $2,000 for an individual and less than $3,000 for a married couple. However, not all assets count towards the resource limits. The SSA lists 44 resource exclusions. The major exclusions include:

  • Your home
  • One automobile
  • Household goods (furniture, etc.)
  • Personal effects (jewelry, artwork, etc.) as long as the SSI claimant is actually using the items
  • Up to $100,000 in an ABLE Account
  • Assets in a special needs trust

“Note that a life insurance policy is not on the list of excluded assets. Having a whole life policy (or any other policy) with a cash-out value may affect SSI like any other asset. This is true even if it hasn’t been cashed out yet. We’ve had clients with a small Gerber policy (whole life insurance for children from 14 days old to 14 years old) their parents bought 30 years ago, and it made them ineligible for SSI,” Rosen observes.

With decades of disability work representing thousands of benefits applicants, we adamantly believe that the SSI asset limits are far too restrictive.

We have long advocated for common sense changes to protect beneficiaries who have rightfully earned their benefits due to disabilities caused by illnesses or injuries. Call your congressperson if you agree with us and think the rules make no sense.

The road to winning Social Security Disability benefits remains long and difficult to navigate.

If you want knowledgeable and effective advocates to guide you and fight for your rights, partner with the Chicago disability lawyers at Nash Disability Law. We’ll give you a free evaluation of your unique situation and if you work with us, we only get paid when you win your case.

It’s easy to get started. Just call or email us today for your free case evaluation.