An insurance payment due to a loss because of an accident, fire, or flood is exempt as lump sum income if the client spent or contracted to spend the money to replace or repair the lost or damaged property. To exempt the money, the client must provide
proof of the expenditures or contract within 60 days of receipt of the lump sum payment.
Examples of expenditures include but are not limited to:
- repair or replacement of a car;
- repair or replacement of a home;
- repair or replacement of furniture; and/or
- replacement of clothing lost or damaged as a result of an accident, fire, or flood.
The amount of a life insurance death benefit used to pay for funeral, burial, or medical expenses of the deceased is exempt as lump sum income. To exempt the money, the client must provide proof that they spent the money within 60 days of receipt.
Budget as lump sum income any money that was not spent or contracted to be spent by the end of the 60-day period (see PM 12-03-00).