OO Life Insurance Proceeds and Death Benefits

Policy

How life insurance proceeds and death benefits are treated depends on the following:

If...	And the program is...	Then the treatment is...
Cash surrender paid to owner	All programs	Excluded, as it is a conversion of a resource, not income.
Accelerated life insurance payments paid to insured	ALTCS SSI-MAO MSP	Counted as unearned income.
Accelerated life insurance payments paid to insured	Adult Caretaker Relative Pregnant Woman Child KidsCare	Excluded. Benefits paid per diem are excluded up to the amount of actual long-term care costs or the IRS per diem rate, whichever is higher.
Death benefits or life insurance proceeds paid directly to the beneficiary	ALTCS SSI-MAO MSP	Counted as unearned income. Exception: Any part of the inheritance that will be used to pay for the deceased person’s burial expenses and outstanding debts is excluded.
	Adult Caretaker Relative Pregnant Woman Child KidsCare	Excluded.

Definitions

Term

Definition

Death Benefits

Death benefits include, but are not limited to, the following:

Lump sum death benefits from SSA;
Railroad Retirement burial benefits;
Veteran’s Administration burial benefits;
Inheritances in cash or in-kind; or
Cash or in-kind gifts given by relatives, friends, or a community group to assist with expenses related to the death.

Accelerated Life Insurance Payments

Also known as accelerated death benefits or living needs benefits, are the early payment of some or most of the proceeds to the insured during his lifetime. This occurs mainly when the insured is terminally ill or permanently confined to a nursing home.

Proof

Income is first obtained through the Federal and State Data Services Hubs. If needed, other proof includes:

To Verify...	By...
Amount of Death benefit	Written statement from the insurance company; Collateral contact with the insurance company; or Copy of check.
Last illness, Burial Expenses, and Outstanding Debts	Bills; Receipts; or Collateral contact with the service provider or billing agency

Legal Authority

This requirement applies to the following programs:

Program

Legal Authorities

ALTCS

SSI-MAO

Medicare Savings Program

42 USC 1382a(a)(2)(D) and (E)

20 CFR 416.1121(e)

Adult

Caretaker Relative

Pregnant Woman

Child

KidsCare

42 CFR 435.603

42 CFR 457.10, 300, 301 and 315