Life Insurance
Include the cash surrender value of life insurance in determining the family’s equity in resources. Consider insurance policies paid for by the family, but insuring another person not in the assistance group, available only to the insured person. If someone else pays the premium, refer to “Provisions That Apply to Both Life Insurance and Prepaid Burials” below.
Prepaid Burials
Disregard $1,500 of equity value for each family member when counting equity value of prepaid burials in determining eligibility for resources. Apply the value of an irrevocable prepaid burial, although not counted toward the resource maximum, against the $1,500 equity value exemption.
Three types of prepaid burial contracts exist. Refer to the General Information Manual for definitions. In arriving at the equity under either of the three contract types, the value is the total of all payments made that exceed the amount to which the seller is entitled upon cancellation. Any interest earned by such deposited funds belongs to the seller.
In the event a family purchased or is purchasing a prepaid burial plan through a written contract that does not meet the specification of the three plans, the individual owns 100 percent of such funds and the $1,500 exemption applies the same way it applies to a valid contract.
If the family has an irrevocable pre-need contract (see the General Information Manual), the following options are available.
- A participant may establish an irrevocable pre-need contract in any amount. Do not count the amount of the irrevocable agreement toward the resource maximum. In rare cases when a person has two prepaid burials, one irrevocable and one revocable, count the amount of the irrevocable agreement against the pre-paid burial exemption of $1,500.
- A participant may declare any pre-need contract in effect on August 13, 1982 irrevocable. The individual must sign an agreement with the seller relinquishing revocability of the contract. Once the contract is made irrevocable, the individual may never regain control of this money.
- A participant must make an informed decision about the type of contract they should sign. Answer eligibility questions concerning available resources. The participant and their family must be allowed to make the final decision.
Provisions That Apply to Both Life Insurance and Prepaid Burials
If the value of the participant’s life insurance/prepaid burial policies on which other persons are paying premiums might affect eligibility, determine the length of time the arrangement has been in effect, the amount paid out in premiums, and whether a release of the policy has been executed.
The assets in a life insurance policy belong to the insured person unless s/he signed a release to a person paying the premiums and registered this release with the insurance company.
EXCEPTION: If premiums have been paid by other relatives since the date of issuance, consider the policy as belonging to this relative, it will not affect eligibility. If the participant paid the premiums for part of the time the policy has been in effect, determine claimant equity by computing his/her proportionate share based on present cash surrender value.
EXAMPLE: An individual’s policy has been in effect for 20 years. It has a present cash surrender value of $800. A daughter paid the premiums for the past 15 years. Consider the individuals equity as five-twentieths or one-fourth of the cash surrender value, or $200. These instructions also apply to prepaid burials.