Life Insurance Policy Disqualify My Dad

Last updated: September 09, 2019
Medicaid Long Term Care | Questions and AnswersCategory: EligibilityLife Insurance Policy Disqualify My Dad
Anonymous asked 1 year ago

My dad has a life insurance policy from his old job. Will this disqualify him for Medicaid? If so, what can we do about it?

1 Answers
medicaidplanner Staff answered 1 year ago

Whether your dad’s life insurance policy will disqualify him from Medicaid depends on the type of life insurance he has, and in the event the policy has a cash value, the value of it.

Most employer based life insurance policies are term life insurance, which do not count towards Medicaid’s asset limit. This type of life insurance has no cash value, which is why it is not counted as an asset. Therefore, if your dad has a term life insurance policy, it will not disqualify him from Medicaid, and there is nothing he needs to do.

On the other hand, if your dad has a whole life insurance policy, it has a cash value, which accumulates over time. While technically this cash value counts as an asset, Medicaid allows an exemption up to a certain face value (the amount that is paid out upon one’s death). Generally speaking, if the face value of a whole life insurance policy is under $1,500, the policy will not be counted towards Medicaid’s asset limit. If the face value is more than this, the cash value of the policy may count towards Medicaid’s asset limit. This could put your dad over the asset limit, which is $2,000 in most states. (To see asset limits by state, click here).

Therefore, if your dad has a whole life insurance policy and it will put him over the asset limit, he can sell or cash out his policy and “spend down” the collected money. He could also transfer the policy to his wife (if applicable) if she is not also applying for Medicaid.\

Click here to learn more about life insurance policies, their impact on Medicaid eligibility, and what to do if your whole life insurance policy puts you over the asset limit.

Determine Your Medicaid Eligibility

Get Help Qualifying for Medicaid