When is Life Insurance Exempt?

Empire Justice January 27, 2017

Sometimes winning a disability claim is only half the battle. What happens when your newly minted disabled client comes back to you with an SSI denial based on ownership of a life insurance policy?  For those of you who never studied insurance law, or can’t remember whether you did or not, you can get a crash course on life insurance in SSA’s POMS. Section SI 01130.300 contains a glossary of terms such as “whole life,” “term insurance,” “cash surrender value” (CSV), and “face value” (FV). https://secure.ssa.gov/poms.nsf/lnx/0501130300

Understanding these terms is crucial to understanding whether a policy counts as an exempt or non-exempt resource for SSI eligibility purposes.  What if a potential SSI recipient has a whole life insurance policy in her name, with another named as beneficiary?  And the policy has CSV (cash surrender value) available to the client? The CSV of the policy (or series of policies all insuring the same person) will be exempt if the combined face value (FV) is less than $1500. If the FV of the policy is more than $1500, the CSV is not exempt; it is considered a resource. The whole CSV is counted towards the SSI $2000 resource limit. See 20 C.F.R. § 416.1230; SI 00605.020.C, Q 3. https://secure.ssa.gov/poms.nsf/lnx/0500605020.

And now that you understand all about insurance policies, remember that the $1500 burial fund exclusion involves an extra quirk. That exclusion will be reduced by the FV of an insurance policy excluded as above. 20 C.F.R. § 416.1231. Aren’t you glad you went into disability law instead of insurance law?