Why Life Insurance Companies Ask for your Social Security Number

Almost all life insurance companies require social security numbers for the insured and beneficiaries for multiple reasons.  Auto and Home Insurance companies though do not necessarily require it. For foreign nationals that do not have a social security number sometimes an ITN number will suffice.

One of the more common questions that insurance agents get is: Why do Insurance companies Need my social security number?  Consumers are smart to ask this intelligent question, given how many social security number thefts there are.

The good news on this front is that more and more Auto and Home insurers are not requiring social security numbers and are instead relying on drivers license numbers.  This makes good sense since most auto insurance requires a drivers license. However the rules and regulations for auto and home insurers vary by state. Some states have more strict guidelines about the use of social security numbers in determining insurance quotes.

The unfortunate news for life insurance and annuities is that just about every life insurance company in the United States (save perhaps one) requires social security numbers. Until such time that a national identification number is established I do not image this changing.

Believe it or not you will need more than just the insured's social security number. In general you will need to know the beneficiaries as well. This is for their protection to assist them in getting any potential death benefit.  If you do not have a social security number on file for your beneficiaries you may risk a legal proceeding or a delayed payment.  From an insurers perspective having social security numbers when they pay money out allows them to file all of their important paperwork with the IRS.

There is also another reason for this. If the beneficiary is not a US Citizen there is a complex process that must be followed if the proposed beneficiary is to get their money. Having a valid social security number confirms with the insurer that you are a US Citizen.

Life Insurance companies will require social security numbers for multiple parties involved.  They require it for several reasons, some of which are more obvious than others.

Preventing Fraud is a cornerstone for the insurance industry. Believe it or not, fraud does exist in all forms  of insurance and using social security numbers, can help prevent this.  Since we have no national identification number your SS number is one of the few ways to confirm that you are not applying for insurance fraudulently.

Closely associated with preventing fraud is confirming your identity. Insurers believe that the knowledge of a social security number is an indication that you are who you claim to be. This is not of course iron clad. 

The MIB group checks your record of insurance applications. This is somewhat tied in with fraud and assists insurers in flagging certain individuals that seem to have a lot of open applications. This helps lower insurer costs.

Insurers issue less expensive life insurance for those that are healthier. In your insurance application process you will need to confirm with the carrier which prescriptions you take and which ones you have taken.  The prescription drug database will be able to independently confirm this. This also assists insurers in lowering overall rates.

Depending on the state in which you live in, certain carriers will check on your history of bankruptcies. There are numerous new states laws/regulations though that are changing this.

Insurers need the social security number for the beneficiaries for multiple reasons.  These include confirmation that the beneficiary is a US Citizen, IRS Tax purposes, and Confirmation of Identity (are they paying the right person.) If the proposed beneficiary is not a US citizen you should probably consult and attorney.  Since life insurance payouts tend to be larger dollar figures the use of the social security number for them tends to not be as debatable.

The short answer to this one is that your social security number is as safe as the insurer makes it. However given the fact that the pentagon is not entirely free of cybercrime, there really is no true safe place for social security numbers anymore.

However, life insurers do require social security numbers. If you believe and want a term or whole life insurance policy than you must hand over your social security numbers, (with perhaps one exception).

Therefore if you want to protect your social security number, as you should, I always recommend that people Freeze their social security number with the big three credit agencies: Experian, Equifax, and Transunion.

From experience we can tell you that we try and not keep people's social security numbers here are Marindependent and WholeVsTerm.  What we do is input the number directly into a carrier system and then we more or less do not see it again.  Of course this does not mean that socials can not be stolen. We recognize this and make numerous efforts to safeguard systems.

In some cases it is possible with one insurer to use an ITN number instead of a SS number, however there are numerous complications to this. One complication is the beneficiaries, will the beneficiaries have social security numbers of their own?  For this reason this solution is no simple at all.

If you have further questions about Why Life Insurance Companies Ask for your Social Security Number feel free to contact us direct at sales at marindependent.com or ask a question in the comment box below and we will attempt to answer it.  One important consideration is that we did not invent this system, but we must work with it.

Thanks for Reading.

sales at marindependent.com