Life Insurance

Life Insurance and Social Security Explained

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Social security life insurance protection is more common than many people realize. While social security and life insurance are separate, there can be considerable overlap. First off, both are a form of insurance. Social security is primarily a form of retirement insurance. However, it's possible to earn life insurance and disability protection through social security tax contributions and the survivor benefits they can include. How much you contribute and for how long plays a deterministic role.

Being insured through a life insurance policy won't impact your social security benefits, but receiving a life insurance payout could. The reason is primarily due to how social security benefits are calculated, but it's nuanced. For instance, social security and social security disability benefits use different rules for interpreting added income. Also, social security benefits before and after retirement age follow different rules. 

Let's look further into the relationship between social security vs. life insurance. 

Do life insurance payouts affect social security disability benefits?

The answer to this can be a little complicated. If you're not yet of retirement age, your benefits could be impacted by receiving a life insurance payout. However, if you've already reached the official retirement age, then the amount of money you earn after that, no matter the source, won't impact your social security benefits. 

If you're past the legal retirement age, you can receive life insurance payouts and get the same monthly social security benefits. So, if you're asking, "does a life insurance payout affect social security benefits," the answer will depend on your age.

The general rule is that external income received can reduce your social security disability benefits by $0.50 for every $1 earned externally (as in, not from social security). The particulars can sometimes be tricky, but most sources of income will count in this manner. 

Consider our tips for maximizing your social security benefits

An exception can occur if your added income comes from public sources instead of private ones—for instance, receiving money from worker's compensation. Yet, even with public sources, your disability income can still decrease depending on how much payment you receive from these other sources. 

The Social Security Administration can balance workers' compensation and SSDI benefits to maintain a specified income target. The result is that an increase in workers' compensation could see a decrease in SSDI. However, your overall income shouldn't go down.

Wonder how much coverage you need?
Our coverage calculator helps estimate how much coverage you need to protect your family.

Do you need social security for life insurance?

Life insurance is available through the private market and can be purchased whether or not you receive social security benefits. Citizens have the legal right to buy life insurance policies, and the social security administration lacks the authority to counter that. 

However, if you want the life insurance benefits of social security, you'll have to be eligible for social security. Eligibility requires paying into the social security system for at least ten years. So, instead of seeing the options as social security vs. life insurance, know that it's wise to have both. For instance, you may live off your social security while maintaining a life insurance policy to protect your mortgage

Can you get life insurance through social security

Does social security have life insurance? It's possible to receive life insurance protection through the social security system. If you pay into social security, you may be eligible for social security life insurance protection. However, life insurance protection through social security can be somewhat limited compared to many private policies. 

These social security life insurance policies are known as survivor benefits and are more restricted than private policies regarding beneficiaries and coverage amounts. Specifically, these benefits can only go to your widow, widower, divorced spouse, unmarried children, or children who are still dependents. 

Buying private life insurance for retirement

When searching for affordable life insurance for retirement to complement social security, some prefer permanent life insurance policies. There are a few prominent reasons for this. First, these policies are generally more available, with less medical restriction to older individuals. 

Second, these policies include cash-value investment features besides their payout coverage amount. That cash value can also be utilized by the insured during their life. While term policies are often less expensive, they lack these specific benefits. (Note that permanent policies offered through Ethos are primarily for older individuals and are designed to be accessible and affordable, so they won't accrue the same value as a policy purchased earlier in life).

Still, there are many ways to use life insurance in estate planning, no matter the policy type.

At Ethos, our available life insurance policies include whole life and term. Applying for life insurance online is designed to be quick and easy. Most applicants can apply without needing a medical exam, although health questions are still included. If you're considering life insurance policies, get a free quote today.

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