Question:

I’m taking a long-term care insurance course. In it there is a discussion of Medicaid asset limits and a list of non-countable assets. It’s reporting that cash value life insurance is a non-countable asset if the face value of all life policies is no more than $1,500. Is that accurate?

Response:

Yes, that’s true. Generally, the cash value of whole life insurance policies is counted as an asset for purposes of Medicaid eligibility, or for that matter, for eligibility for Supplemental Security Income (SSI) as well. But if the face value of the insurance is $1,500 or less, it doesn’t matter what the cash value is since the policy is not counted.

If the policy is larger than $1,500 and the cash value will put the applicant above the limit for countable assets — $2,000 for individuals and about $150,000 for married couples when one is in a nursing home and the other is living in the community — it usually makes sense to simply cash out the policy and spend down the proceeds. However, there are instances when it can make more sense to borrow against the policy. This way, the death benefit of the policy can be preserved. Of course, this also means that the family must be able to pay the premiums in order to maintain the policy.

We used to bring all this up more with clients, but as the value of smaller policies has dropped over time with inflation, we see very few existing policies this small. And given what else clients have on their hands when a family member needs to apply for Medicaid, we choose not to burden them with buying such policies to shelter such a small amount, especially when the premiums are likely to be high given the age and health of the nursing home resident. So, yes, these very small life insurance policies are non-countable, but they’re rarely relevant.

 

Related Articles:

Asset Limits for Medicaid Coverage of Nursing Home Care

Are IRAs Countable Assets for Purposes of Medicaid Eligibility?

Are Gold and Silver Coins Considered to be Countable Assets?

Can Medicaid Applicant Transfer Life Insurance Policy to Spouse?

Spending Down for Medicaid Eligibility