Orlando Harmon
Life insurance policies can impact Medicaid eligibility, depending on the type of policy and its value. In most states, individuals can't have more than $2,000 in assets to qualify for Medicaid, and life insurance policies may be counted as assets. In Kansas, Medicaid eligibility is determined by income and asset limits, and the state's KanCare program makes final Medicaid determinations. While Medicaid cannot take one's life insurance policy while they are still living, the face value of the policy may be counted towards the asset limit, and proceeds from the policy may be claimed by Medicaid after the policyholder's death.
| Characteristics | Values |
|---|---|
| Life insurance impact on Medicaid eligibility | Depending on the type of policy and its value, life insurance may impact eligibility for Medicaid. |
| Type of policy | Term life insurance is exempt from Medicaid's asset limit. Whole life insurance is only exempt if the total face value of all combined policies is not more than the state-specific value ($1,500 in Kansas). Burial insurance does not impact Medicaid eligibility. |
| Policy owner | The owner of the policy matters, not the beneficiary. A Medicaid applicant can have a friend or relative purchase the insurance policy and keep it in effect. |
| Cash value | Whole life insurance accrues a cash value that the owner can access, which can be counted as an asset. |
| Medicaid eligibility | Medicaid is for low-income individuals of all ages. In Kansas, seniors who receive Supplemental Security Income (SSI) payments automatically qualify for Medicaid. |
| Income rules | The household's income must be less than the maximum income level for the program. Income over $62/month must go towards nursing home costs. |
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What You'll Learn
Life insurance policies may impact Medicaid eligibility
Life insurance policies can impact Medicaid eligibility. The impact of life insurance policies on Medicaid eligibility depends on the type of policy, its value, and the state of residence. While some life insurance policies are exempt from Medicaid's asset limit, others may cause an applicant to exceed the limit, affecting their eligibility for Medicaid.
Term life insurance, which provides coverage for a limited time, typically does not impact Medicaid eligibility. If the policyholder dies within the designated coverage period, a death benefit is paid out to the beneficiaries. However, if the policyholder does not pass away while the policy is in effect, the policy expires, and no benefit is paid out. Term life insurance policies do not accumulate cash value and cannot be cashed out, making them exempt from the Medicaid asset limit.
On the other hand, whole life insurance, which provides coverage for the entirety of a person's life, can impact Medicaid eligibility. Whole life insurance policies accrue a cash value, allowing policyholders to take out loans against the cash value or "cash out" by terminating the policy. Since policyholders can access cash from their existing policy, it may be counted towards Medicaid's asset limit, potentially rendering the applicant ineligible for Medicaid.
The treatment of life insurance policies as assets varies by state, and it is important to understand the specific rules and regulations in one's state. In some cases, transferring ownership of the policy to a family member or a third party can help eliminate its impact on Medicaid eligibility. However, it is always recommended to seek professional advice from a Medicaid Planner or an elder law attorney specializing in Medicaid planning to navigate the complex eligibility requirements and make informed decisions.
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Term life insurance is exempt from Medicaid
Medicaid eligibility is determined by one's income and owned assets. Therefore, life insurance policies with a cash value are considered when applying for this government benefit. The cash value of a life insurance policy refers to the ability of the policyholder to borrow against the policy or terminate the policy and collect the cash surrender value. This cash value is considered an asset and can impact one's eligibility for Medicaid.
Whole life insurance, a type of permanent life insurance, can impact Medicaid eligibility. Whole life insurance provides coverage for the entirety of one's life and pays out a death benefit to the beneficiaries upon the policyholder's death. With whole life insurance, a cash value is accrued, allowing policyholders to take out loans or terminate their policy and collect the cash value. Since whole life insurance policies have a cash value, they are not automatically exempt from Medicaid's asset limit. However, they may be exempt if the face value of all policies is under a certain state-specific value, typically $1,500.
It is important to note that the impact of life insurance policies on Medicaid eligibility depends on the specific circumstances and state of residence. In some cases, a partial exemption may be applicable if the policy's value exceeds the specified limit. Additionally, the beneficiary of the life insurance policy can play a role in determining whether Medicaid can access the proceeds. If the beneficiary is the policyholder's estate, Medicaid may take the proceeds of the death benefit to recover costs paid for long-term care through the Medicaid Estate Recovery Program. However, if the death benefit is paid directly to a named beneficiary, Medicaid cannot touch it.
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Whole life insurance may be counted as an asset
Whole life insurance is a type of permanent life insurance that provides coverage for the entirety of a person's life and pays out a death benefit to the beneficiaries upon the policyholder's death. Whole life insurance policies accrue a cash value, allowing policyholders to take out loans against the cash value or terminate their policy and collect the cash surrender value. This feature of whole life insurance policies, where policyholders can access cash from their existing policy, means that they are not exempt from Medicaid's asset limit.
Whole life insurance, and other types of permanent life insurance with a cash value component, are considered assets because they provide the ability to withdraw funds from the policy while the policyholder is alive. The cash value of whole life insurance policies grows over time, and the policyholder can access these funds. This makes whole life insurance an asset, particularly during divorce proceedings or mortgage underwriting.
The cash value of whole life insurance is also considered an asset in the context of Medicaid eligibility. While term life insurance is automatically exempt, whole life insurance is only exempt if the total face value of all combined policies does not exceed a certain threshold, typically $1,500. If the face value exceeds this threshold, the cash surrender value of the policy will be counted towards Medicaid's asset limit, potentially impacting eligibility.
It is important to note that the treatment of whole life insurance as an asset may vary depending on the specific circumstances and state regulations. Additionally, the impact of whole life insurance on Medicaid eligibility depends on the value of the policy and the specific Medicaid program being considered. Individuals should consult with a financial advisor or expert in Medicaid planning to understand how their specific whole life insurance policy may be treated as an asset.
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Medicaid eligibility for long-term care in Kansas
In Kansas, Medicaid is a health care program for low-income individuals of all ages. There are varying coverage groups, but the focus here is on long-term care Medicaid eligibility for elderly Kansas residents, aged 65 and over.
There are three categories of Medicaid long-term care programs for which Kansas seniors may be eligible:
Institutional/Nursing Home Medicaid: This is an entitlement, meaning anyone who is eligible will receive assistance. Benefits are provided only in nursing home facilities. In 2025, a single Nursing Home Medicaid applicant in Kansas must meet the following criteria:
- Nearly all of one's income must go towards nursing home costs.
- Assets under $2,000.
- Require a Nursing Home Level of Care.
- Medicaid Waivers/Home and Community-Based Services (HCBS): This is not an entitlement; there are a limited number of participant slots and waiting lists may exist. Services are provided at home, adult day care, adult foster care homes, or in assisted living.
- Aged, Blind, and Disabled (ABD) Medicaid: This provides healthcare coverage and long-term care services to financially needy Kansas residents who are aged (65+), blind, or disabled and live in the community. ABD Medicaid is an entitlement, meaning anyone who meets the requirements is guaranteed healthcare coverage without wait. Access to long-term care benefits via ABD Medicaid depends on the availability of funds, programs, and caregivers in the beneficiary's region.
It is important to note that not all nursing homes accept Medicaid, and those that do may not have available spaces. Eligible applicants are guaranteed nursing home coverage without wait, but not in any facility of their choice.
Additionally, when considering life insurance policies and Medicaid eligibility, the owner of the policy is what matters. Depending on the type of policy and its value, it may impact one's eligibility for Medicaid. If the life insurance policy causes an applicant to have assets greater than Medicaid allows, their application for long-term care may be denied. While Medicaid cannot take one's life insurance policy while they are still living, the cash surrender value may be counted towards Medicaid's asset limit, rendering one ineligible for Medicaid.
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Medicaid eligibility requirements for married couples
In Kansas, the Medicaid program is called KanCare. It is a needs-based program, typically for those with assets of less than $2000. However, eligibility requirements differ for married couples.
When determining eligibility for one spouse, the assets and income of both spouses are considered, regardless of premarital agreements or the nature of ownership of the assets. All assets of a married couple are considered jointly owned, regardless of which spouse is applying for Medicaid or if both spouses are applying. This includes any income or assets held in an IRA or 401K.
In 2023, the applicant asset limit for a senior in Kansas was $2000, and the income limit for Regular Medicaid is quite low. However, seniors who receive Supplemental Security Income (SSI) payments automatically qualify for Medicaid. In 2024, this pathway to Medicaid eligibility allowed married couples to have an income of up to $1,415 per month. In 2025, this increased to $1,450 per month.
The Spousal Impoverishment Law, sometimes called the Division of Assets, changes the Medicaid eligibility requirement for couples when only one spouse needs nursing home care. It allows the spouse remaining at home to protect a portion of their income and resources. The Minimum Monthly Maintenance Needs Allowance (MMMNA) is a Spousal Impoverishment Provision that allows a married couple to transfer a portion or all of their monthly income to their non-applicant spouse. In Kansas, the MMMNA is $2,555 from July 1, 2024, to June 30, 2025. If the non-applicant spouse's income is less than this amount, income can be transferred from the applicant spouse to bring it up to the MMMNA level.
There are also certain assets that are exempt from the asset limit. These include personal keepsakes and belongings, household goods and furnishings, one automobile, life insurance policies with a death benefit of up to $1,500, burial spaces, irrevocable burial fund agreements up to $11,360 or $11,670, and generally, the primary home.
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Frequently asked questions
It depends on the type of life insurance and the value of the policy. Term life insurance is exempt from Medicaid's asset limit, whereas whole life insurance may be counted as an asset if the face value of all policies is over $1,500.
To qualify for Medicaid in Kansas, your household income must be less than the maximum income level for the program you are applying for. For example, for the Regular Medicaid program, the income limit is quite low, and seniors who receive Supplemental Security Income (SSI) payments automatically qualify.
Yes, but you must use your other health insurance first.
