Can a nursing home take my life insurance policy?

Cost of Nursing Home Life Insurance Policies

If you or a family member needs nursing home care on a short term or long term basis, you need a means to pay for the care. A nursing home cannot take your life insurance policy.

The issue is, whether the cost of a nursing home stay can be paid for by the patient or the family, or whether government programs must step in. Nursing home care is currently estimated at $3000 to 6000 per month.

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Medicare and the Misunderstanding of How it Works

Most people who are going into a nursing home are on Medicare. Many people mistakenly think that Medicare will cover the cost of nursing homes.

That is not correct. Medicare will cover up to 100 days of a nursing home stay, after a patient, who has Medicare Coverage has been hospitalized for an illness or injury, for at least 3 days. A doctor must recommend the nursing home stay.

For the first 20 days, it pays for 100 percent of the cost. For the last 80 days, there is a co-pay attached.

If the patient goes home and is fine for 60 days, and then has a recurrence of the illness, and is hospitalized for at least 3 days, they can start their nursing home stay over again.

After the 100 days, Medicare does not pay any more costs for nursing home care. Therefore, it is important to understand that Medicare is not a long-term-care program.

Ways People Cover the Cost of Long Term Care in Nursing Homes

Many people who need long-term care in a nursing home, finance it with a long-term care insurance policy. If they do not have a policy, they may finance their care out of their personal income and assets.

That may include Social Security benefits, pension income, savings or cash values on life insurance policies.

Since we now understand that Medicare does not cover long-term nursing home care, we know that an individual must cover their own costs.

When a person runs out of money, to cover costs, Medicaid kicks in. Medicaid pays for the majority of people in nursing homes today. The issue is, qualifying for Medicaid.

A person who has a lot of assets will not qualify.

Most states only allow those with assets of $2000 or less to qualify for Medicaid.

If you have a life insurance policy with a cash value of $10,000, you will have to borrow from the policy, until the cash value is gone or at least less than the allowed asset level. It is considered an asset by the government.

It is not the nursing home then, that requires the use of cash values, it is the government before they will start covering the costs of nursing home care for you.

Things to be Aware of With Transferring Assets

Beware of transferring assets to others before needing nursing home care. To qualify for Medicaid, you cannot have transferred assets to family members or friends within the five years leading up to your entering the nursing home.

If it is found that this has happened, Medicaid will delay coverage based upon the asset value transferred. These assets include life insurance policies with cash values.

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Married Couple Rules

There are special rules that apply to married couples. The spouse still living at home, will be allowed to keep a set amount per month, of the combined income, so they do not become destitute paying for care.

Check with your state to see the amount allowed. It is around $1,800 per month of income.

The spouse still living at home, may keep half of the couple’s assets, when their spouse is admitted to the nursing home, in addition to their home and furnishings of the home.

There is usually a maximum amount set for the protected assets.

What Happens to the Life Insurance?

Neither the nursing home nor the government can go after the benefits paid to beneficiaries after a person dies, who has been on Medicaid for nursing home care.

If the insured had only term insurance, as long as the premiums are paid and the policy is in force, the death benefits are protected for the beneficiary.

In the case of whole life insurance, once the cash value has been taken out of the policy, the remaining death benefit will still be paid to the survivors. The nursing home nor Medicaid can come after the survivors for payment.

So, you can keep your life insurance policy, even after Medicaid has taken over the cost of your nursing home stay.

The cash value portion will be considered as an asset, so you may have to use that portion of the policy before you can even get Medicaid benefits, but it is Medicaid and the government that makes the rules about coverage and it is based on assets and income.

The nursing home just wants to get paid for their services. They have no pre-authorized right to take away a life insurance policy from a patient.

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