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Life Insurance
The following rules apply to all life insurance policies except for Endowment life Insurance Contracts.
Exempt
- Term insurance (with no Cash Surrender Value).
- Policies which have a Cash Surrender Value (CSV) and the combined face value of all policies owned by the insured individual is $1,500 or less.
Note: The $1,500 exemption applies to each member of the MFBU who owns a policy(ies).
Nonexempt
When the combined face value of all of the policies, including term insurance with CSV, for an insured individual exceeds $1,500, the net CSV of all policies is counted in the property reserve.
Example
Dividends which have been accruing to the policy must be included in the CSV. The client is responsible for keeping the CSV under the property limits. A loan may be made against the CSV to accomplish this. Verification of how the money was spent is required, if the CSV amount was over the property limit. Property spenddown rules apply.
Verification
The CSV nonexempt life insurance policies shall be verified by viewing either of the following:
- The value tables included in the policy, or
- Signed correspondence from the carrier indicating the current value.
Determination of Value
When using the cash value table to determine the CSV, the EW must be aware of the amount of the face value of insurance that the table is based on, full or partial value.
- Determine the age of the owner of the policy on the date of the policy issuance.
- Determine the years that the policy has been in force.
- Use the chart usually attached to the policy to compute the value per $1,000, or other stated amount.
- Multiply the value per $1,000, times the number of thousands in the face value of the policy.
- The result is the CSV of the policy.
Availability of CSV
The CSV of the life insurance policy is considered unavailable once an individual has taken the necessary steps to make the CSV available. The client must provide verification that the necessary steps to liquidate the policy have been initiated. He/she must continue to make a good faith effort to liquidate the policy, and provide additional verification if requested by the EW.
The CSV will remain unavailable until it is actually received. Once the client receives the money (usually the month following the month the request to liquidate it is initiated), it becomes available. If the client is property eligible for at least one day in the month of receipt, he/she is eligible in that month. The CSV can be considered unavailable in a retroactive month only if the client initiated steps to liquidate it during, or prior to, the retroactive month.
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