Life Insurance - Beneficiaries and Debt

Life Insurance

Have you ever wondered if life insurance policy proceeds need to be used to cover any debt left by the deceased insured? When a person dies, one of the biggest concerns becomes what bills have to be paid. Who is responsible?

Although the rules that govern life insurance payouts may vary from state to state, the simple answer is there is no simple answer, but generally speaking the estate is responsible for any debt left upon death.

If the life insurance policy has a designated beneficiary (spouse, child, etc.) who survives the deceased insured, then the proceeds from the insurance policy will pass directly to the beneficiary outside of probate and away from the reach of creditors.

If the deceased had a Last Will and Testament, then provisions contained within will dictate whether or not you’ll be required to contribute to the payment of the outstanding debt.   

It is important to ensure that your family will be taken care of in the event of your death, so making sure you have the best life insurance in place and that you have named the appropriate person(s) as your beneficiary will ease your mind knowing that your family will be taken care of when you’re gone.

Since the laws may vary by state, it is always recommend you consult an estate attorney. 

About the author: Melanie Tretheway has been in the life insurance business for over 30 years. She is a mother of two who loves baking, reading, gardening, and taking care of her family. Melanie takes great pride in making sure you are informed, especially when it comes to choosing the right life insurance policy for your family. You can contact Melanie at 1-800-651-1953 or