You probably have heard of Medicaid, a joint federal and state government program that provides health insurance coverage for low-income individuals. Because your income not only affects your Medicaid eligibility but also your life insurance coverage, Medicaid recipients have specific considerations to keep in mind when securing life insurance. Let’s walk through the ways in which Medicaid can impact life insurance eligibility and the life insurance options available for Medicaid recipients.
What is Medicaid?
Medicaid is a government-funded program that provides coverage to low-income individuals and families, as well as people with certain disabilities. Administered jointly by the federal government and individual states, Medicaid offers a wide range of medical services, including doctor's visits, hospital care, prescription drugs, and long-term care. The program plays a crucial role in ensuring access to essential healthcare services for vulnerable populations, serving as a safety net for those who may not have the means to afford private health insurance. Eligibility for Medicaid is determined based on income, household size, and other factors, with coverage extending to children, pregnant women, parents, seniors, and individuals with disabilities.
Do Medicaid benefits impact life insurance eligibility?
If you’re a Medicaid recipient applying for life insurance, it’s important to be aware of how this can affect your life insurance eligibility. During the underwriting process, your evidence of insurability will be evaluated using your income, financial background, and information about your beneficiary or beneficiaries. This helps the underwriter make sure your policy will work as intended as an income replacement for anyone who depends on you financially.
To be eligible for Medicaid, your income and assets must fall below a certain threshold. However, the threshold that makes you eligible for Medicaid could potentially make you ineligible for life insurance. If you don’t have a sufficient income level to qualify for traditional life insurance, you could be denied coverage.
Permanent Life Insurance Could Impact Medicaid Eligibility
If you have an existing permanent life insurance policy, it could impact your Medicaid eligibility. This is because there is a limit on assets you can own to be eligible for Medicaid. Permanent life insurance policies typically come with a savings 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, this amount 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 ineligible for traditional life insurance because of your Medicaid benefits, there are still coverage options available to you, regardless of your income.
Guaranteed Issue Life Insurance
Guaranteed issue life insurance is a form of final expense insurance through which you can’t be denied coverage 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 being a Medicaid recipient can make the life insurance application process more complicated, it is still 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.
1https://www.medicaidplanningassistance.org/medicaid-eligibility/
