No, the life insurance policy would not be considered income. The cash value of a life insurance policy is an asset that the state looks at when determining Medicaid eligibility. If your father cashes in the policy, it is no different from him moving money from one account to another. It does not increase the level of your father’s assets, and it should not affect your mother’s Medicaid coverage.
For more information see: Can Life Insurance Affect Your Medicaid Eligibility?
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