Anonymous asked 5 years 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?
medicaidplanner Staff answered 5 years 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.
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 at or under $1,500, the policy will not be counted towards Medicaid’s asset limit. If the face value is more than $1,500, 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. See state-specific asset limits.
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 a whole life insurance policy puts one over the asset limit.