Does Medicaid impact life insurance eligibility?

A man searches online to learn more about how Medicaid will impact his life insurance eligibility

Medicaid is a government program that provides health insurance coverage for low-income individuals. Since your income impacts your eligibility for both Medicaid and life insurance coverage, obtaining life insurance coverage can be tricky for Medicaid recipients. Below we explain how Medicaid can impact life insurance eligibility and the life insurance options for Medicaid recipients.

What is Medicaid?

Medicaid is a federal and state program that helps those with limited income and resources with healthcare costs. Medicaid can provide additional coverage that Original Medicare does not offer beneficiaries, including nursing home and personal care services.

Do Medicaid benefits impact life insurance eligibility?

Medicaid benefits could impact your life insurance eligibility, and here’s why.

When you apply for life insurance, you’ll be evaluated on your evidence of insurability. Your evidence of insurability is determined by your income, financial background, and your beneficiary’s dependability on your income. Insurers evaluate this to make sure your policy functions as an income replacement for people who depend on your income, not to increase your family’s wealth. 

To be eligible for Medicaid, you must be below a certain amount of assets and income. The threshold that makes you eligible for Medicaid could potentially make you ineligible for life insurance.

Permanent Life Insurance Could Impact Medicaid Eligibility

Just like Medicaid could impact your life insurance eligibility, there’s a chance your existing life insurance coverage could impact your Medicaid eligibility. There is a limit on assets you can own to be eligible for Medicaid. 

Permanent life insurance policies often have an investment-like component known as the cash value. This cash value can be accessed while you’re alive, and therefore is considered an asset when applying for Medicaid. The average total assets you’re allowed to have under Medicaid is around $2,000, however, it varies by state. A permanent life insurance policy under $1,500 is usually exempt from being considered an asset, but if your policy’s death benefit is above $1,500, the cash value will count toward the $2,000 asset limit.1

Life Insurance Options for Those on Medicaid

If you’re eligible for traditional life insurance because of your Medicaid benefits, there are still coverage options that you can purchase regardless of your income. 

Guaranteed Issue Life Insurance

Guaranteed issue life insurance is a form of final expense insurance in which you can’t be turned down if you’re between the ages of 45-85. It does not require a medical exam, submission of medical records or any database check. This makes it a great option for someone who needs coverage immediately or who believes a medical exam or questionnaire might work against their favor for coverage.

Simplified Issue Life Insurance

Simplified issue life insurance is another form of final expense insurance in which your coverage is based on a medical questionnaire about your health and lifestyle instead of a medical exam. While acceptance isn’t guaranteed, simplified issue life insurance is a great option if you’re worried about your current health working against you in terms of cost.

Can Medicaid take life insurance proceeds away from beneficiaries?

Although life insurance proceeds aren’t normally at risk, Medicaid can seek financial restitution using the Medicaid Estate Recovery Program (MERP). In order for Medicaid to take your life insurance proceeds using MERP, all of the following must be true:

  • Your life insurance is paid out to your estate instead of to a beneficiary 
  • Medicaid paid for your long-term-care services
  • You have no surviving spouse, children under age 21, or children with disabilities

Find the Right Life Insurance Policy with SelectQuote

While Medicaid can make the life insurance process a little more confusing, it is possible to get the financial protection you need for your loved ones. At SelectQuote, we’ll take the time to get  to know your needs and situation, and help you find the best life insurance policy options available to you from the trusted carriers we work with.


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