Can father in law use his term life insurance policy to fund care for his wife with Alzheimer's?

Just notice that I read the question wrong. I read it as long-term care policy. Silly me. If the policy is term life, then it doesn't have any cash value. The only way anyone might lend money on it was if there was some way to assure that the payments would be made and that the policy would not be canceled for any reason. I don't think many lenders outside of family would be willing to do that.

If the policy is only for your father, it insures only him. Does the policy mention his wife? If not, she will not be covered. Insurance can't be transferred from one person to another.

Read the policy and see if there are options for selling it or using its value in a way to get cash out of it. Contact the company for a detailed explanation. Medicaid may be in their future rather than using the insurance policy.

You want to google "life settlement" of the life insurance policy. It may be possible to get money now out of that term life policy. Possible, but maybe not a good idea. Look at the consequences and definitely look into qualifying for Medicaid before taking any irrevocable action.