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Life Insurance Benefits

February 4, 2013

life insurance benefits

The Secret Debt Collectors Don’t Want You to Know

There is a secret that many people are unaware of concerning life insurance benefits; a secret you need to know before you talk to a debt collector.

Debt collectors rank right up there (down there) with bottom feeders, just ask anyone who has dealt with one. The less than stellar reputation that collection agencies have is brought on by ruthless, unsympathetic and rude tactics that many of them employ to collect a debt.

When someone dies, there is a period of time that his or her life does continue in some form or fashion. Many “loose ties” need to be “tied up.” Many times those loose ties are in the form of debts left behind.

So what happens to your life insurance benefits when the insured dies owing money?

The debt is still outstanding and creditors will attempt get payment for the debt, many times knowing that the owner of the debt has died. Collection agencies might be called in to help. These companies will resort to several means to collect this debt. One of the more common tactics used is telling the decedent’s heirs that they must use the whole life insurance benefits (or term life insurance benefits) to pay off the debt owed.

The secret is that this is absolutely not true

In most cases, unless your name was on the debt, you have no obligation to pay the creditor any money at all. If you are the spouse of the decedent, you may have an obligation to pay the debt. You need to check with your original creditor if you are unsure if you are listed on the debt. (By original creditor, I mean the company the debt originated with since many times these debts are given to second- or third-party collection agency).

Another factor in this situation is your state law concerning community property. You may be responsible for some or all of the debt if you live in a community property state.

If you are the beneficiary of life insurance benefits, or if you are the insured make sure you understand that the benefits gained from the life insurance policy are NOT part of the decedents estate and therefore do not have to be used to pay off a debt.

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