Monday, March 12, 2012

Will a Life Insurance Policy Affect My Eligibility For Medicaid Benefits?


Many people question if their insurance policy is considered an asset with regards to Medicaid eligibility guidelines. Not many people understand that this type of insurance is enough to give a complete answer to this question. It is not a simple yes or no answer. In fact, depending on the type of insurance you have or the insurance quotes you are getting will determine your eligibility.

There are two basic types of life-insurance: whole-life insurance and term-life insurance. Whole-life insurance provides a set death benefit that your beneficiaries receive when you die. It also builds cash value that can be taken out of the policy and used for a variety of things with a variety of different plans. It is actually worth money to the person whom it is insuring against their death; therefore it has value and is considered an asset. Unlike whole-life insurance, term-life insurance does not have any value to the person whom it insures. Term insurance provides insurance in larger quantities at a locked in premium for a set time, or term. There is no cash value therefore no money can be withdrawn from the policy unless the insured dies. Because there is no cash value, term insurance is not considered an asset.

People obtaining a quote of this type of insurance often have varying reasons why they prefer a particular type of coverage over the other. Sometimes the customer is unsure of what they need, so they ask for guidance. If you do this, it is extremely important to be very honest with the agent so that he or she can accurately provide you with a quote that would best suit your needs. If you are enrolled in Medicaid then term-life insurance would probably be the best option for you, although everyone is allowed to have a small policy.

For a single person the guideline for assets is $2,000. It does not matter what the death benefit is on the policy, because Medicaid will only be concerned with the cash value of a whole-life insurance policy. Therefore, if you're insurance policy has a cash value of less than $2,000 and you do not have any other assets then you are within the acceptable guidelines.

If you own a whole-life insurance policy or you are getting insurance quotes for whole life and you do not want to do term insurance, but you are on Medicaid, there is an alternative to consider. You could still get the coverage you want with the options that you want and not have it count as your assets if you made a close friend or relative the owner of the policy. This is not something to be considered lightly because the owner of the policy holds all of the rights to the policy from that day moving forward, even if you are the insured.

Another alternative if you already have the whole-life insurance policy with a value greater than you are permitted to have, then you can take the cash value out of the existing policy and convert it. For example, you can either spend it or reinvest it into a new, separate term-life insurance policy.

While some insurance policies do count as assets which can affect your legibility, it is important to consider all the possibilities before making any decisions. Call your insurance agent and ask him or her to do some insurance quotes. Explain to the agent what you need, want the policy to do, what you can afford and explain your legibility guidelines for Medicaid.




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