Can Life Insurance Affect Your Medicaid Eligibility?

In order to qualify for Medicaid, in Maryland, you can't have more than $2,500 in assets. Many people forget about life insurance when calculating their assets, but depending on the type of life insurance and the value of the policy, it can count as an asset.

Life insurance policies are usually either "term" life insurance or "whole" life insurance. If a Medicaid applicant has term life insurance, it doesn’t count as an asset and won't affect Medicaid eligibility because this form of life insurance does not have an accumulated cash value. On the other hand, whole life insurance accumulates a cash value that the owner can access, so it can be counted as an asset.

That said, Medicaid law exempts small whole life insurance policies from the calculation of assets. If the policy's face value is less than $1,500, then it won't count as an asset for Medicaid eligibility purposes. However, if the policy’s face value is more than $1,500, the cash surrender value becomes an available asset.