Life Insurance and Life Events
What happens to life insurance in bankruptcy?
In bankruptcy, life insurance policies may be protected from creditors depending on the type of policy and state law. Term life insurance has no cash value and is generally not an asset in bankruptcy. Whole life cash value may be protected up to a certain amount depending on state law.
Key Points
- Term life insurance: no cash value — generally not an asset in bankruptcy
- Whole life cash value: may be protected up to a certain amount
- State law: determines the extent of protection
- Beneficiary designations: affect whether death benefit is protected
- An independent agent can help you understand life insurance in bankruptcy