You have many things to consider when applying for Medicaid. Eligibility requirements differ from state to state, but for the most part states all have stipulations about life insurance and whether owning a policy will affect your eligibility in any way. Whether you have a life insurance policy already or are considering purchasing one, this valuable financial protection for your loved ones doesn’t have to get in the way of your Medicaid eligibility. Keep reading to find out if your policy will affect your Medicaid application and what to do if it does.
Medicaid and Assets
When you apply for Medicaid, the state has to assess your financial eligibility. Applying for Medicaid is slightly different in every state, but no matter where you apply, you’ll have to document all your assets. Investments such as stocks, bonds, and CDs count toward your assets. So do checking and savings accounts, property that isn’t your primary residence, and any extra vehicles.
To be financially eligible for Medicaid, your assets can’t total more than $2,000. Sometimes life insurance counts toward these assets, and sometimes it doesn’t. To better understand when life insurance counts as part of the sum of your assets and when it does not, make sure you’re familiar with the following key points.
The Cash Value of a Life Insurance Policy
Some life insurance policies accumulate a “cash value,” which is not the same thing as the amount that the life insurance policy pays out to your beneficiaries (the “face value” or “death benefit” of the policy). The cash value is separate, and you can withdraw and use it before the policy pays out.
Two types of life insurance policies exist: term life insurance and whole life insurance. When you purchase a term life insurance policy, you have the policy for a certain amount of time (for example, 20 years), and during that time it doesn’t accumulate any cash value.
Whole life insurance policies, on the other hand, do not terminate after a certain amount of time. Whole life insurance does accumulate a cash value that comes out of premium payments and builds up over time.
Life Insurance as an Asset
Because term life insurance doesn’t accumulate a cash value, you don’t have to worry about it affecting your eligibility for Medicaid. In other words, your term life insurance policy won’t count as an asset.
Under certain circumstances, the cash value of a whole life insurance will count toward the sum of your assets and might have a bearing on your ability to get Medicaid. If the face value of your life insurance policy falls under a certain amount (for the federal government it’s $1,500, but in some states it’s higher), then your life insurance policy’s cash value will not count toward your assets, as long as the cash value also does not exceed $1,500. If that’s the case, then you don’t have to worry.
If the face value of your life insurance policy is more than $1,500 to $2,500, depending on the state, then your cash value will count toward your assets.
How to Qualify for Medicaid With Life Insurance
If you have a term life insurance policy, you do have a few things to consider once you qualify for Medicaid, even though your life insurance policy does not count as an asset. One thing you might not have thought about is your income after qualifying for Medicaid. When you have Medicaid, you’re only allowed to keep $50 of your monthly income. Paying for a term life insurance policy can be difficult under those stipulations. Therefore, you might want to consider transferring your policy to another person.
Transferring a life insurance policy means the policy owner changes, not the beneficiary or the person being insured. Therefore, you can still be insured by your term life insurance policy, and your beneficiaries remain the same, even after you transfer ownership of the policy.
Transferring your life insurance policy is one way to remove the cash value from your assets. If you aren’t the policy owner, then that cash value is no longer yours and won’t count toward your assets. Control over the policy also no longer belongs to you, so make sure you transfer your policy to a close family member.
Generally, transferring the policy to your children is the best idea. A spouse might pass away before you do, or you could lose the insurance policy if you end up divorced. Plus, a spouse’s assets count toward your Medicaid eligibility, and they cannot total more than $119,220. You do have more room with joint assets and spousal assets than you do with your own when qualifying for Medicaid.
You might also want to assign the policy to a funeral home, because assets going toward funeral costs are not counted when determining your Medicaid eligibility. This means your life insurance plan’s face value goes to the funeral home upon your death, and anything left over will go to your beneficiaries.
If transferring your life insurance isn’t right for you, you might consider taking out a loan against your life insurance policy’s cash value. This effectively reduces your cash value as far as counting it as an asset is concerned. Interest payments also take away from your death benefit, which lowers that, too. Keep in mind that a lower death benefit means your beneficiaries will receive less money upon your death, so don’t take borrowing against your cash value lightly.
You don’t have to choose between a life insurance policy and qualifying for Medicaid. It’s possible to have both, and even if your policy counts toward your assets, several options are available for you to still qualify for Medicaid. If you have any further questions, a lawyer or your local Medicaid office can give you answers. So rest easy knowing that your health is taken care of and that your life insurance policy is there to take care of your loved ones.
Getting Affordable Life Insurance
One of the most common reasons that older Americans don’t have life insurance is because they assume that a plan is going to be too expensive. In most cases, that couldn’t be further from the truth. Don’t let expensive premiums keep you from having the protection that you and your loved ones deserve. There are several ways that you can secure insurance rates from the company.
As you probably know, your age is going to play a huge role in how much you pay for your protection. The older that you are, the more that the insurance company is going to charge you for coverage, but that doesn’t mean that you have to pay a fortune. Because your age is going to impact how much you pay for your plan, it’s important that you don’t wait any longer to apply for coverage. Every year that you wait, the more that you’re going to pay for your protection.
Another way that you can save money is to kick your bad habits, like smoking cigarettes. If you’re a smoker, you should expect to get drastically higher rates for your insurance plan. Smokers have a much higher chance of being diagnosed with complications like cancer or a heart attack. That means that you’ll be a high-risk applicant to the company, and they are going to offset that by charging you higher premiums. Smokers are going to pay twice as much for their coverage versus what a non-smoker would pay for the same sized plan. Especially if you’re an older applicant, quitting smoking is not only the best thing that you can do for your health, but also the best thing that you can do for your wallet.
The best way to ensure that you’ve gotten have the lowest rates is to compare dozens of quotes before you decide which one is best for you. Unlike traditional insurance agencies, we are a group of independent brokers and that means that we don’t work with one single company. Instead, we represent dozens of highly rated companies across the nation and we can bring a personalized set of quotes directly to you.
If you have any questions about life insurance or the types of coverage available to you, please contact one of our agents today. We would love to answer those questions and ensure that you’re getting the best plan possible. Our independent agents have years of experience working with all types of clients across the country and we know which companies are going to offer you the best plan possible.
You never know what’s going to happen tomorrow, which means that you shouldn’t wait any longer to get the life insurance protection that your loved deserve. If something tragic were to happen to you, and you didn’t have life insurance coverage, your loved ones would be responsible for a massive amount of debt and other final expenses. Don’t wait another day to get the life insurance plan that your family needs.
For a quote, contact us today at 1-888-552-6159.