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In general, the equity value of life insurance policies is counted as a resource. The equity value of a life insurance policy is the cash surrender value (CSV) minus any outstanding loans on the policy.
Exception:
If the total face value of all life insurance policies the customer owns on any person is $1,500 or less, the equity value of the policies is excluded.
NOTE For policy on income from life insurance proceeds or death benefits see MA606.OO.
In determining whether the total face value of life insurance policies the customer owns on a person is $1,500 or less, the face value of the following are excluded:
· Burial insurance policies and term insurance policies with no cash surrender value;
· An insurance policy that has been irrevocably assigned to fund a burial contract or irrevocably placed in a burial trust;
· An insurance policy with a funeral provider irrevocably named beneficiary when the policy owner has no access to the policy's CSV and cannot cancel the policy;
· An insurance policy revocably assigned to fund a pre-need burial arrangement; and
· An insurance policy declaratively designated as a burial fund.
NOTE Dividend accumulations left with the insurance company to accumulate interest are counted as a resource, even if the policy itself is excluded.
When an insurance policy is a countable resource, the value of any dividend additions is added to the policy's original CSV to determine the policy's current CSV.
The insurance company type determines whether the policy pays dividends. The type of company is usually identified on the face page of the policy after the firm's name.
· A policy issued by a non-participating or stock company generally does not pay dividends.
· A policy issued by a participating or mutual company usually does pay dividends.
Dividend additions are included in the CSV of the policy. Dividend accumulations that are not included in the face value or CSV of a policy and are left with the insurance company to accumulate interest, are added to the CSV of the policy.
The table below provides specific policy for certain types of life insurance:
If the policy is... |
Then… |
Burial Insurance |
The treatment depends on whether the customer can access the CSV: · If the customer can access the CSV of the policy, it is treated as life insurance according to the policy in this section. · If the customer does not have access to the CSV, it is treated as a burial fund under MA705D. |
Term Life Insurance |
Term life insurance usually does not generate a cash surrender value. The face value of the term insurance policy is not included in the resource determination. The equity value is only determined when it is known that the policy has a potential CSV (such as group policies contracted through Navistar International). |
Accidental Death Insurance |
Accidental death policies do not have a CSV. Only the type of policy must be verified. |
Assigned to fund a burial contract |
If the policy's owner has no access to the policy's CSV and cannot cancel the policy, the policy is treated as an irrevocable burial fund (see MA705D). |
Declaratively designated as a burial fund |
The policy is treated as a revocable burial fund (see MA705D). |
Demutualized life insurance |
If the customer or spouse owns stock in an insurance company due to the demutualization of the insurance company, it is treated as stocks (see MA705X). If the customer or spouse received a cash payment due to the demutualization of the insurance company, any remaining cash is a countable resource. |
Term |
Definition |
Accidental Death Policy |
Accidental death policies pay only upon the death of the insured caused by sudden, unexpected or unintended external causes. |
Beneficiary |
The person named in the contract to receive the proceeds of the policy upon the death of the insured person. |
Burial Insurance |
An insurance policy with terms that prevent it from being used for anything other than payment of the insured's burial expense is burial insurance and not life insurance. |
Cash Surrender Value |
The amount that the insurer will pay to the policy owner upon cancellation of the policy before the death of the insured individual or maturity of the policy. |
Declarative Designation |
A signed statement in which the individual who owns the resource states the purpose for which the resource is set aside and the date on which it was set aside. |
Dividends |
Payments of a share of any surplus company earnings to the policy owner. · Dividend Additions - Amounts of insurance purchased with dividends and added to the policy, increasing its death benefit and CSV, but not the face value. The table of CSV that comes with an insurance policy does not reflect the added CSV of any dividend additions. Dividend Additions are also called Paid-up Additional Insurance. · Dividend Accumulations - Dividends that the policy owner could have received but left in the custody of the insurer to accumulate at interest. They do not add value to the life insurance policy. The owner can obtain them at any time without affecting the policy's face value or CSV. |
Face Value |
The death benefit contracted for at the time the policy is purchased or maturity amount of the policy. The face value is shown on the face of the policy. Face value does not include: · The face value of any dividend addition which is added after the policy is issued; · Additional sums payable in the event of accidental death or because of other special provisions; and · The amounts of term insurance, when a policy provides whole life coverage to one family member and term coverage for others. |
Life Insurance |
A contract where the owner pays premiums to the company that provides the insurance. In return, the insurer agrees to pay a specified sum to a designated beneficiary upon the death of the insured. |
Mutual Company |
A company that has no capital stock, is owned by policy owners, is managed by a board of directors chosen by the policy owners, and usually issues participating insurance only. |
Non-Participating Policy |
A policy for which a fixed guaranteed premium is payable, and which makes no provision for the payment of any dividends on the policy. |
Ordinary or Whole Life Insurance |
A contract for which the insured individual pays premiums for a period of time, and on which the company pays the face amount of the policy to the beneficiary upon the death of the insured person. This type of insurance usually has a CSV. |
Participating Policy |
A policy which shares in the distribution of dividends out of the surplus earnings of the company. |
Stock Company |
A company that is owned by shareholders who share in the earnings of the company. Stock companies may issue participating and non-participating policies. |
Term Life Insurance |
A life insurance policy under which the benefit is payable only if the insured person dies during a specific period of time. No benefit is paid if the insured person survives to the end of the term. Generally, term insurance policies do not generate CSV. |
Proof needed for life insurance policies is based on whether or not the policy generates a CSV:
Policies that do not generate a CSV:
Proof of the policy type for accidental death policies and most term life insurance policies includes:
· A copy of the policy;
· A collateral contact with the insurance company confirming that it is an accidental death policy, or that a term life insurance policy does not have a CSV.
Policies that generate a CSV:
Proof of ownership, CSV and equity value of life insurance includes:
· Request for Verification of Life Insurance Policies (DE-204) Form completed by the insurer;
· A letter of value provided by the life insurance policy; and
· Annual Dividend Statements.
A collateral contact or a life insurance policy is acceptable proof if it contains all of the following:
· Name and address of the life insurance company (insurer);
· Name of the policy owner;
· Name of the insured individual;
· Name of the beneficiary;
· Face Value;
· CSV of the policy (less any loans);
· If the policy is revocable or irrevocable;
· Policy number; and
· Date the policy was issued.
NOTE When using insurance tables to determine the CSV of a policy, some tables specify a value per $1,000 of coverage, meaning that the amount listed is multiplied by the appropriate factor.
Program |
Legal Authority |
ALTCS |
20 CFR 416.1201 20 CFR 416.1230 AAC R9-28-407 |