Will Medicaid Take My Life Insurance?

Medicaid has strict income and asset guidelines in order to be eligible for coverage in 2010. Life insurance policies are considered countable assets in some cases. Medicaid does not take life insurance away from individuals; however, applicants can be turned down because of life insurance.

Life Insurance Face Value

• When the applicant owns the life insurance policy, if the face value of the life insurance exceeds $1,500, they may be required to cash in the policy. The face value is the amount beneficiaries would be paid in the event of the applicant's death. You may consider having a close family member keep the policy in effect by purchasing the policy from the applicant.

Term Life Insurance

• If the applicant owns a term policy, there is no cap on the face value. An applicant can own any amount of term life insurance since they are exempt regardless of the face value amount. This type of life insurance carries no cash value. The owner or other family members are responsible for paying the premium each year to keep it active.

Tips for Policy Holders

• If a Medicaid applicant has life insurance exceeding the limit, they may want to consider canceling the policy to receive medical coverage. Avoid giving away policies, since it may look suspicious to Medicaid and could jeopardize an application.