Introduction 5 402. 02 Resource Limit 5
Development of Countable Life Insurance
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- Insured
- Note
- Dividend additions
- Example 1: Owner has two policies on himself
- Example 2: Owner has policies for herself and others
402.18.01 Development of Countable Life Insurance(Rev. 09/01/14) Consider the resource value of a life insurance policy to be its cash surrender value (CSV), not its face value (FV). Term life insurance policies do not have cash value and are not included. Burial insurance policies are not included. There is a difference between being the insured, the owner, and the beneficiary of the policy. Insured The insured is the person on whose life the insurance company issues the policy. Owner The owner of a policy is the one who has control of the policy. He may take such actions as: Cash in a policy Take a loan against the cash value Change ownership to another person Change the beneficiary An individual may own life insurance on himself or on another person. A life insurance policy can be a resource only to the owner of the policy.
Beneficiary The beneficiary is the individual(s) who receives the proceeds of the policy at the insured individual’s death. A person may be both the owner and the beneficiary. (Example: Jim Wright purchases a $1,500 life insurance policy on his mother, Janis Wright, and is the beneficiary upon her death.) For all policies owned by an individual, separate the policies based on who is insured. Total the FV for each insured person separately. If the total FV for the insured person is less than or equal to $1,500, do not count the policies as a resource for the owner. The $1,500 FV life insurance exclusion applies for each insured person. Dividend additions The insurance companies use surplus company earnings, called dividend additions, to buy more insurance protection for the life insurance policy owner. Dividend additions increase the FV and CSV. Do not include the FV of dividend additions when determining whether a life insurance policy is a countable or excluded resource: If the life insurance policy is a countable resource, do include the CSV of dividend additions when determining the resource value of the policy. If the life insurance policy is an excluded resource, do not include the CSV of dividend additions when determining the individual's countable resources. Dividend accumulations Dividend accumulations are surplus company earnings, which accrue in an account that the insurance company controls for the policy owner. The policy owner can access these funds without penalty at any time without affecting the FV or CSV. Therefore dividend accumulations may be countable resources unless they are excluded under a different resource exclusion (e.g., set aside for burial). Do not exclude dividend accumulations under the life insurance provision, even if you exclude the life insurance policy that pays the accumulations. Unless the accumulations are excludable under another provision (for example, because they have been set aside for burial), count the accumulations as a resource, even if you exclude the life insurance policy itself because the policy's FV is $1,500 or less. Note: If the verification cannot be obtained from the insurance company, the cash value tables contained in the policy may be used or the Estimated Cash Surrender Value according to instructions contained in MPPM 302.17.02. The countable cash surrender values of the policies and accumulations are countable toward the resource limit unless it can be excluded as a burial asset. (Refer to MPPM 402.20.) Even if a policy is excluded, any accumulated dividends are countable toward the resource limit unless they are excluded under another provision such as the burial exclusion. (Refer to MPPM 402.20 for information on Burial Exclusion.)
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