The cash value of a life insurance policy which is owned by the client and/or spouse is counted as an asset unless:
- the policy is exempt; or
- the total face value is $1,500 or less.
The following types of life insurance policies are exempt:
- Term policies with no cash value.
- Group policies provided by an employer.
- Group policies required for employment.
- Policies on the life of an ineligible family member who is not the client's responsible relative.
- Policies on the life of an eligible client owned by someone other than the client. This disregard does not apply to policies insuring a child who is a client if the policies are owned by the child's parent who is living in the home.
Disregard the cash value of non-exempt life insurance policies when the total face value is $1,500 or less. The client and their spouse can each have non-exempt life insurance with a total face value of $1,500 or less. If the total face value of the client's or spouse's non-exempt life insurance is more than $1,500, apply the total cash value to the asset limit.
See PM 07-02-08-d for a life insurance policy that funds a prepaid burial contract.
When determining eligibility, do not use life insurance owned by someone other than the client or a responsible relative living with the client. There must be proof of ownership when a client claims that someone else owns an insurance policy.
When it appears that an insured client is eligible for disability benefits through a health and accident or life insurance policy, the client must apply for the benefits. If the client fails or refuses to apply for the benefits, the client is ineligible for cash benefits.
Disability benefits paid from a life insurance policy are nonexempt income unless they reduce the face amount of the policy. If the benefits reduce the face amount of the policy, they are a nonexempt asset that is applied to the asset limit.
Insured clients must provide information on the current beneficiary of the insurance policy.