Can Creditors Claim Life Insurance Benefits?

Shawn Plummer

CEO, The Annuity Expert

Creditor Claims on Life Insurance

Life Insurance Beneficiary vs. Estate:

  • Individual Beneficiary: When a life insurance policy names an individual as a beneficiary, creditors generally cannot claim these benefits. The payout goes directly to the beneficiary, bypassing the estate.
  • Estate as Beneficiary: If the life insurance benefit is payable to the insured person’s estate, it becomes part of the estate’s assets. In this scenario, creditors may have a claim against these benefits as they are part of the estate’s total value.

Key Points to Remember

  1. Direct Beneficiary Protection: Naming a person as a beneficiary provides protection from creditors.
  2. Estate Inclusion Risk: Benefits payable to an estate are subject to estate debts, including creditor claims.
  3. Legal Variations: Laws vary by state, so specific state laws should be considered.

Related Reading: Can the IRS Take Money From A Life Insurance Policy?


To protect life insurance benefits from creditors, it’s crucial to designate an individual as the beneficiary rather than the insured’s estate. This ensures the benefits go directly to the intended person without becoming part of the estate assets, which creditors can claim. By understanding these distinctions, you can effectively safeguard life insurance proceeds.

Contact us today for a free quote.

Free Life Insurance Quotes

Get help from a licensed financial professional. This service is free of charge.

Contact Us

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

Scroll to Top