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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