Generally it depends on what situation you are in. ie, If you are in a nursing home because of the expense that is occur on a daily basis they usually have you do a financial intake form where it ask you various questions to determine assistance and because Life insurance is an asset sometimes depending on the state will ask you to cash out insurance policies especially if you are the owner of the policy.
When you go through a spend down process to apply for Medicaid, they will look at your assets. Term Life Insurance does not have a cash value, so is not considered an asset. Cash value life insurance is allowed to have a certain face amount, and if it is under that, you can keep it. If it is higher than the allowable limit, you may have more choices than just cashing it in and using it for your skilled care expenses (note: Medicaid does not just take your policy away). You can possibly assign the policy to a funeral home for your final expenses. Or you may be able to keep part of the death benefit and use the rest to help pay for nursing home costs under the Long Term Care Benefit Plan. Your social worker should help you find the option that works best for your welfare.
If you foresee going on Medicaid in the distant future, you may want to consider transferring ownership of your cash value life insurance to someone else. This must be done years ahead of time, or it will still be called an nonexempt asset.
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If you foresee going on Medicaid in the distant future, you may want to consider transferring ownership of your cash value life insurance to someone else. This must be done years ahead of time, or it will still be called an nonexempt asset.