Medicaid can be a valuable resource in paying for a stay in an care facility, but there are financial eligibility rules for various assets that make applying for Medicaid complicated. Life insurance is one type of asset that can affect Medicaid eligibility under certain circumstances.
Broadly speaking, for the purposes of Medicaid eligibility, there are two types of life insurance: term life insurance and whole life insurance. Term life insurance provides coverage for a number years, but expires once the term is up. A death benefit is only paid if the person being insured dies within that fixed term. Whole life insurance provides coverage for the entirety of an insured person’s life and pays out a benefit whenever death occurs. Both term and whole insurance policies can have a cash surrender value. If a policy has a cash surrender value, then the policy holder can cancel the insurance policy for the amount of the cash surrender value.
Term life insurance does not affect Medicaid eligibility. Even if the policy has a cash surrender value, the policy will still not count.
Whole life insurance policies that have a cash surrender value do affect an individual’s Medicaid eligibility. Regulations on specifically how these policies affect Medicaid eligibility vary by state, but in general individuals can have a whole life policy with a cash surrender value of up to $1500 while still maintaining eligibility for Medicaid. Whole life policies that do not have a cash surrender value do not affect Medicaid eligibility.
For Missouri residents, individuals can only have one whole life insurance policy that has a cash surrender value of up to $1500. An additional Missouri requirement is that applicants may only have that whole life policy if they do not have a prepaid funeral plan. If an individual has both a prepaid funeral plan and a whole life insurance policy with up to a $1500 cash surrender value, they will have to eliminate one or the other before becoming eligible for Medicaid in Missouri.
If you, or a family member, is considering Medicaid as an option to pay for a care facility, please call Martha C. Brown & Associates at (314) 962-0186 to help guide you through the Medicaid application process.
