Life insurance is an important purchase for many families. It provides protection for the income of someone who is working to support a family. If such wage earner dies, the life insurance pays out a specified amount to the beneficiaries of the policies. There are many types of policies and features offered on the policies, but life insurance policies can be classified in one of two categories: term and permanent. A term policy is effective for a specified period of time, such as 20 years. If the person whom the insurance is on dies within the 20 year period, and the premiums on the policy have been paid, the death benefit is paid. At the end of the term period or when the policy is cancelled, whichever occurs first, the policy is gone and no payments are made. This is contrasted with permanent insurance, some examples of such are universal and whole life. These policies have monthly premium payments in excess of the amount needed to pay for the insurance. The payments above the amount needed to pay for insurance build up cash value that can be borrowed against. This cash value can also be accessed if the policy is terminated.
The existence of this cash value can cause problems for seniors seeking long term benefits to pay for long term care. The two programs routinely used to pay for long term care, nursing home Medicaid and VA pension, have asset limits that must be met for coverage to be received. The amount of money that is available from permanent life insurance policies if such are cashed in is countable towards qualification for such programs. The VA counts the full amount of money that may be paid when the policy is cashed in. nursing home Medicaid counts the full amount of the policy, subject to a small exclusion that has many intricate requirements for qualification. An experienced elder law attorney can provide the advice and strategy for obtaining nursing home Medicaid and VA pension when there is life insurance with cash value.