Life Insurance & Estate Planning

Term life insurance carriers have become much more competitive in recent years for individuals over the age of 65.  Carriers over the past 10 years have begun to lower the cash value on these policies while increasing the death benefits.  Some term and universal life policies are designed to provide a guaranteed death benefit to age 95 with a level premium and no cash value.  This benefit results in more death benefits for each premium dollar. Also policies designed for couples can provide a significant amount of insurance for a single premium even if one of the partners is in very poor health.

An important factor to think about is that single premium life policies with no cash value and purchased for estate planning purposes, at least 5 years in advance of applying for Medicaid can be a valuable asset if the need for Medicaid arises.  You see Medicaid does not apply the death benefit of a life policy to the asset spend down rule, but cash value of any life policy more than $1,500 in cash will count towards the asset test and would not allow someone to qualify for Medicaid.  An example of this would be if 2 individuals applied for a $5 million policy and later realized they needed to receive Medicaid benefits this is what could happen.  The first individual had cash value of less than $1,500 so it did not count against him in qualifying for Medicaid; however the second guy had cash value over $1,500 so the policy applied towards the asset test with Medicaid.  If you need to get a life insurance quote with less than $1,500 in cash value please contact me.

If an individual is worried about having their assets cleared due to the need for Long Term Care, a planning strategy many have implemented is buying Life Insurance with a part of the assets that can also leverage a death benefit payout.  This payout can sometimes equal $3 in death benefit for every $1 in single premium.  This way they still have a portion of their assets that would go to their grand children in the form of life insurance in case the LTC services drained their nest egg.  Also this still leaves the door open for Medicaid coverage if needed, due to having less than $1,500 in cash value.

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Article added 08/16/2011 by Ryan Eaton
Senior Division Manager: Morgan White Group
ryan.eaton@morganwhite.com

For more info about Term Life Insurance, please feel free to contact me.
Submit basic questions to: seniordivision@morganwhite.com.