If someone is applying for MassHealth to help cover nursing home costs, they’re only allowed to have a small amount of money or “countable assets” — usually $2,000 or less. But what about life insurance? Can you keep it and still qualify?
Let’s break it down in simple terms.
First, What Is Life Insurance?
Think of life insurance as a contract that pays money to your loved ones when you pass away. But there are two different types of value inside a life insurance policy:
- Face Value: This is the amount your family will get when you die — like $1,500, $5,000, or even $50,000.
- Cash Surrender Value (CSV): This is how much money your policy is worth if you cancel it and take the cash out early. (It’s usually much lower than the face value.)
The $1,500 Rule in Massachusetts
In Massachusetts, when applying for MassHealth (Medicaid), only one life insurance policy is allowed to be exempt (not counted against the $2,000 asset limit) — but only if the face value is $1,500 or less.
Here’s what that means:
- If you own one life insurance policy with a face value of $1,500 or less, the policy doesn’t count toward your asset limit. The cash value inside the policy also doesn’t count. You’re safe!
- If the face value is more than $1,500, then the cash value does count as part of your assets. That could push you over the limit and delay or deny your application.
- If you have multiple life insurance policies — even if they’re all under $1,500 — only one can be exempt. The others will have their cash value counted.
Prove It or Lose It
To get approved, you must show MassHealth proof of both the face value and the cash value of your life insurance. If you don’t, your application could be delayed or even denied.
What If Your Life Insurance Is Countable?
Don’t worry — you still have options. This is called a "spend-down" — using your extra money in allowed ways to qualify. Here are a few:
- Burial Trust: A prepaid funeral contract (must be “irrevocable” — meaning you can’t change your mind).
- Burial Savings Account: You’re allowed to set aside up to $1,500 just for funeral costs in a separate account.
- Personal Items: You can buy approved items like clothes, medical devices, or a TV for your nursing home room — just keep receipts!
Bottom Line:
One life insurance policy under $1,500? You’re good — it’s not counted.
More than one or over $1,500? You’ll need to spend down the value or possibly assign it to a funeral home.
Always provide documentation or your application may get stuck.
