How Can You Protect Your Life Insurance Policy From Medicaid?


Quick Answer

Life insurance policies valued above $1,500 may be used by Medicaid in determining eligibility for long-term care coverage, according to LongTermCare.gov. Assets that Medicaid considers should be transferred into other asset types not counted by Medicaid in order to avoid being considered for Medicaid use.

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Full Answer

For the purposes of Medicaid coverage, recipients are allowed to keep $2,000 in total assets, states LongTermCare.gov. Household members may retain up to $3,000. Insurance policy assets are limited to $1,500 total. Protecting any asset from Medicaid may require willingness to use the asset to pay down debts, purchase an asset that is not counted by Medicaid or transfer ownership of the asset.

Medicaid recipients seeking coverage of long-term care expenses don't lose eligibility based on principal residence value. Buying a larger home may reduce assets considered by Medicaid while preserving asset value, reports Bankrate. Medicaid does have the right to seek recovery of expenses from an estate, however, and the agency may look back as far as 60 months to see if assets were transferred during that period. Protecting asset values requires advance planning and preparation. Purchasing insurance to cover assisted living expenses may be the best strategy to preserve substantial assets such as life insurance policies.

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