A California appeals court holds that a woman who purchased an endowment life insurance contract that repaid her premium and dividends during her lifetime and did not pay a death benefit is not entitled to Medi-Cal because the contract is not a life insurance policy. Lind v. Maxwell-Jolly (Cal. Ct. App., No. C061912, July 28, 2012) (unpublished).
Not all life insurance is the same, and that’s not just an old sales trick to up-sell a client. In the eyes of Medicare and Medi-Cal, not all life insurance actually is “life insurance” – and that can be a reason to deny benefits.
Consider the case of Lind v. Maxwell-Jolly (Cal. Ct. App., No. C061912, July 28, 2012) (unpublished), as discussed here on ElderLawAnswers.com, where an endowment life insurance contract became an impediment to Medi-Cal Long Term Care benefits.
Mary Lind, a nursing home resident, applied for Medi-Cal Long Term Care benefits and then purchased a "Single Premium Pure Endowment Life Insurance Contract" for $92,000. Here’s how the contract works: If she were still alive at the contract maturity date five years hence, then Ms. Lind would be repaid her premiums plus dividends. Of course, the state and two appeals courts weren’t buying it. Since the contract specifies that it will repay Ms. Lind in her lifetime, it is not life insurance. Further, the contact didn’t even specify the amounts to be paid out to beneficiaries upon her death. Accordingly, the court held that the contract is more akin to a legal trust and, therefore, the funds invested in it are available funds precluding her from Medi-Cal Long Term Care benefits.
Clearly, then, not all “life insurance” is life insurance. As in all things financial, and legal, look before you leap.
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Reference: ElderLawAnswers.com (August 1, 2011) “Endowment Life Insurance Contract Is Available Asset for Medicaid Availability Purposes