Building cash value through burial insurance can be a gradual process

When it comes to burial insurance, the cash value of the policy is the only aspect that is considered an asset. However, it’s important to note that building cash value takes time and is not an immediate concern.

Burial insurance typically falls under the category of whole life policies, which means it earns interest at a rate determined by the insurer. This interest rate is typically around 2% of your premium.

Considering this rate of accumulation, you can understand that it will take a significant amount of time before the cash value becomes a potential concern in relation to your asset limit.

You have options to manage the cash value when you approach your asset limit

If you find yourself getting closer to reaching the maximum allowed for your assets, there are steps you can take to reduce or eliminate the cash value’s impact on your Medicaid eligibility. It’s important to consult with a licensed health insurance agent to discuss the specific options available to you.

Here are a few general possibilities to consider: you can withdraw the cash, take out a loan against the cash value, or even utilize it to pay the premiums of your policy. These actions can help you manage the cash value effectively and ensure it does not interfere with your Medicaid coverage.

Many states have provisions in place to provide exemptions for certain types of life insurance policies

It is essential to consult with a life insurance agent or professional to understand the specific rules and regulations in your state. However, in general, most states have established exemptions for whole life insurance policies, typically up to $1,500 in face value, although some states may have higher exemptions.

Here’s a brief explanation of how the exemption works:

If the face value of a life insurance policy exceeds the exemption amount set by the state, the cash value of the policy is considered a countable asset.

On the other hand, if the face value of the policy falls below the exemption limit, the policy is exempt and not counted towards Medicaid’s asset limit.

To illustrate this further, let’s consider a couple of examples shared by the American Council on Aging:

Bill resides in Illinois and holds a whole life insurance policy with a face value of $1,200 and a cash surrender value of $500. In Illinois, the exemption amount for whole life insurance policies is $1,500. Consequently, Bill’s life insurance policy is not considered when calculating Medicaid’s asset limit.

Claudia resides in Texas, where the state allows an exemption of up to $1,500 for whole life insurance policies. She owns two policies: one with a face value of $1,000 and a cash value of $300, and another with a face value of $1,500 and a cash value of $700. The combined face value of Claudia’s policies adds up to $2,500, exceeding the allowable exemption amount. Therefore, only the combined cash value of $1,000 will be considered as a countable asset.

It’s crucial to review your specific circumstances and consult with professionals who can provide accurate information based on your state’s regulations.