He lives in MA. Became long term in May of this year. Has Medicare and Medicaid. Its only a $10k policy, which was set in place essentially to pay for funeral services when the time comes. Nursing home's list of info requested included life insurances, which is what popped this into my mind. Thanks
I'd guess that the question about life insurance has more to do with families' losing interest in settling their parents' bills after their parents have passed away: i.e. self-funding residents. But I repeat, only a guess.
But many people are best served by hiring an elder law attorney in your state who can explain the entire eligibility picture, and how it applies to you and your father.
If your father has limited assets, there is no reason why he should not immediately qualify for Medicaid. The only requirement is that his assets be organized properly, to comply with the Medicaid regulations.
A life insurance policy worth $10,000 would disqualify him, but the excess value of the policy can be used to buy non-countable assets (like an irrevocable funeral contract). It's also possible to set aside any excess assets in a pooled trust arrangement for your father or transfer the assets to people who are exempt from Medicaid transfer penalties.
You won't know until you talk with the professional who can give you the big picture.
The problem with the free services provided by the nursing home is the volume of work that they must contend with. Often they can't give immediate attention to the many details that could help you. Timing matters when you need eligibility to begin now.