Does Your Insurance Money Have to Pay Other People’s Debts?

Insurance salespeople often tell you that, when you buy insurance, you are buying peace of mind. If you have ever filed an insurance claim, your experience is probably the opposite. Insurance claims adjusters find every excuse to pay less on your claim than you need, distorting your words to use them against you and making you file volumes of paperwork, stay on the phone for hours, and wait months for a measly settlement check. You start to wonder if, like the chatty neighbor portrayed by John Goodman in Barton Fink, the person who sold you the insurance policy is the incarnation of evil. In some cases, though, you are better off after receiving an insurance settlement than you would be without it. Knowing your luck, though, debt collectors come knocking almost as soon as you deposit the insurance settlement check in the bank. Whether you have an obligation to use the money you receive from an insurance payout to pay debts depends on the insurance payment, and it depends on the debt. If you are still struggling with debts despite recently receiving money from an insurance company, contact a Boca Raton debt lawyer.

Do Life Insurance Beneficiaries Have to Pay Debts Owed by the Policyholder’s Estate?

Life insurance policies pay a lump sum to the beneficiary listed by the policyholder, usually a family member or friend of the policyholder, when the policyholder dies. Life insurance policies are not part of the policyholder’s estate. During probate, the estate is responsible for paying debts that the deceased person owed when he or she died, but the creditors can only take money from the estate to repay these debts; sometimes this means that the amount that the beneficiaries of the will inherit is less that what the deceased person had at the time of death. Life insurance payouts are a non-probate asset. Therefore, even if you have to spend a lot of money from your deceased family member’s estate to repay debts, the creditors cannot touch your life insurance payout.

Personal Injury Settlements and Divorce

Accidental injuries and the expenses that go along with them have caused strain on many marriages, and some couples eventually divorce after one spouse suffers an accidental injury that requires him or her to leave the workforce before retirement age. When a couple gets a divorce, the court must divide their marital property and marital debts; most couples reach an agreement during family court mediation, and the judge just finalizes the divorce by signing off on the couple’s agreement. Each spouse gets to keep his or her separate property, which includes the property that he or she earned during the marriage, as well as personal injury settlements that he or she received during the marriage. You might emerge from your divorce responsible for some debts that your ex incurred during the marriage, but you are under no obligation to use your personal injury settlement money to repay them.

Work With a Debt Lawyer About Debt and Insurance Payouts

A South Florida debt lawyer can help you if insurance money is the only thing standing between you and financial catastrophe.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.

Source:

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