Can Life Insurance Affect your Medicaid Eligibility?

Medicaid is a vital tool for millions of Americans. In fact, 72 million Americans—or 20% of the country’s population—depend on this federal government assistance, which is designed to provide financial support for low-income individuals. But, can life insurance affect your Medicaid eligibility? It’s an issue that’s especially salient today, as so many Americans find themselves victims of the climbing unemployment rates, and others are facing the unfortunate reality of a cancer diagnosis or other serious medical illness. If they’re faced with feeling like they have to choose between a policy they’ve invested in for many years or the ability to access critical financial support, the financial stress may be just as damaging as any physical, mental or emotional struggles they’re undergoing.

Is Life Insurance an Asset when Applying for Medicade?

It’s a question that anyone who is considering applying for Medicaid needs to explore. Medicaid requires that enrollees have less than $2,000 in assets—which typically includes checking and savings accounts, stocks and bonds, and additional properties and vehicles other than your primary ones. Though many don’t consider it at first, however, life insurance can also count as assets.

Term life insurance doesn’t build cash value—so if you have this type of policy, you don’t need to consider the question, can life insurance affect your Medicaid eligibility? However, if you have a whole life insurance policy, which does accrue value, your eligibility may be in jeopardy. Medicaid considers policies with a face value of more than $1,500 to be an asset; so if your death benefit is worth more than that, you may not be approved.

What Are the Options?

It’s still possible to take advantage of your life insurance policy and receive Medicaid benefits, as long as you make strategic financial decisions. You can surrender the policy entirely and use the cash value to meet your financial needs, or you could also transfer your policy to a spouse or put it in trust for a dependent. Taking a loan on the policy is another option to reduce its cash value. Life Credit’s Living Benefits Loans allow policyholders to borrow against their policy’s death benefit; with that option, the face value would be reduced and they may be able to have the policy exempted as an asset.

Life insurance and Medicaid are both needed financial tools for many Americans, and figuring out how to balance the two is key to financial success.

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