Does life insurance affect Medicaid or SSI?

SSI has a strict asset limit. It is $2,000 for one person and $3,000 for a couple. Texas Medicaid for seniors and people with disabilities uses the same life insurance rules.

What counts is the cash value, not the death benefit. The cash value is what you would get if you cashed the policy in today.

Term life has no cash value. So it does not count. Burial insurance and term coverage from your job do not count either.

If the face amounts of all your whole life policies on one person add up to $1,500 or less, SSI does not count them. Go over $1,500 and the cash value counts as an asset.

Living benefits can count too. Alabama says money you take early from a policy may count as income once you choose to take it. But you cannot be forced to take it before you qualify for Medicaid.

• Term life: not counted
• Burial insurance: not counted
• Whole life with $1,500 or less total face value: not counted
• Whole life over $1,500: cash value counts
• A policy assigned to a funeral home for good may be excluded

More questions

Can I sign my policy over to a funeral home?

Yes. If a funeral home is made the beneficiary for good and you give up the cash value, it is excluded. It does lower your separate $1,500 burial fund allowance.

Does a prepaid funeral count?

In New Jersey, a person on Medicaid or about to qualify can sign a prepaid funeral deal that cannot be cancelled. That can help meet the rules.

Do the rules differ by state?

Medicaid rules are set by each state. Call your state Medicaid office before you change a policy.

Words to know

Cash value

The savings part of a permanent policy. It grows over time and can be used for loans, cash, or to pay premiums.

Face amount

The amount stated on the policy that will be paid if you die or the policy matures.

Whole life

Permanent insurance that lasts your whole life as long as you pay. Premiums, death benefit, and cash value are guaranteed.