President, Lane Independent Agency, Southern California
If you have term life insurance it has no cash value. That would make the answer very simple. No one can take that from you. So your life insurance would remain secure while in a nursing home, if it is term insurance, so long as you can find a way to continue to pay the premiums. The more interesting question is what if you have permanent or cash value life insurance? These policies build up value, and can actually be sold, or surrendered for cash. A nursing home might want that money. Depending on the nursing home and their contract with you, they might require you to pay them from such proceeds, but there is no legal requirement that you do so for them, and you can, of course, go to a different nursing home. The harder question is what if you have no or little other assets, and are planning to enter a government assisted facility? Medicare will NOT pay for long term care, but MediCal will, but you will need to spend down your assets. So the question arises, if you are required to spend down your assets, will you have to sell the life insurance policy (meaning surrender its cash value) in order to stay in a MediCal nursing home. The answer to that very narrow specific question can change from time to time, as the MediCal rules change. But know that if you wish to claim impoverishment, and you retain ownership of a substantial cash value asset, you should expect the government to demand that you sell it and use the proceeds to pay for your care. Tread carefully. Thank you. GARY LANE.
Nursing homes do not take away life insurance. However, IF you are going on Medicaid because you have depleted your other resources to pay for your long term care, your life insurance will be evaluated to see if it is an exempt asset. Only cash value policies are considered eligible assets, and the amount of face value/cash value that is exempt can vary. If your policy is small enough, you may be able to assign it to a funeral home (a final expense policy is allowed). There is also a regulation now allowing some people to keep part of the death benefit, while using the cash value to pay for their care.
To protect your permanent life insurance policy, you could transfer ownership to someone else, but it must be done before the "look back" period of 5 years has passed. You could also put it in a trust designed to keep it out of your estate. If you have permanent life insurance policies, talk to a a financial advisor or attorney to assist you.
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To protect your permanent life insurance policy, you could transfer ownership to someone else, but it must be done before the "look back" period of 5 years has passed. You could also put it in a trust designed to keep it out of your estate. If you have permanent life insurance policies, talk to a a financial advisor or attorney to assist you.