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Beware – New Jersey’s Medicaid Rules on Life Insurance are Tricky

Medicaid does not consider term life insurance policies as a resource, countable toward the appropriate resource maximum.  However, Medicaid does count life insurance with cash value as a resource when the total death benefit of all cash value life insurance policies exceeds $1,500.  These policies must be cashed in (or sold) and the proceeds spent down.  The fair market value of a cash value policy is the amount of cash value, as opposed to the death benefit.  Sometimes, the cash value is much smaller than the death benefit, leaving a large spread between the two.  In that case a family member may choose to buy the policy.

Note that if the death benefit of all policies totals more than $1500 then all the cash value is countable.  Don’t make the mistake of looking at the cash value, and if under $1500, then think it is exempt.  It is not unless the death benefit is under $1500.

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