Does Filing Bankruptcy Impact my Life Insurance Policy Proceeds?

Does Filing Bankruptcy Impact my Life Insurance Policy Proceeds?

In general, a bankruptcy proceeding will not directly impact your life insurance policy. However, the proceeds of your policy may be subject to bankruptcy proceedings if they are considered part of your estate.


Here are some things to consider when it comes to bankruptcy and life insurance:


  • If you name your estate as the beneficiary of your life insurance policy, the policy proceeds may be considered part of your estate and may be subject to bankruptcy proceedings.

  • If you name an individual as the beneficiary of your life insurance policy, the policy proceeds will typically be paid directly to the beneficiary and will not be subject to bankruptcy proceedings.

  • If you set up a trust to hold your life insurance policy, the policy proceeds will typically not be considered part of your estate and will not be subject to bankruptcy proceedings.

  • Some life insurance policies are designated as "payable on death" (POD) policies. These policies allow you to name a beneficiary who will receive the policy proceeds upon your death, regardless of any bankruptcy proceedings.


It is important to carefully review your life insurance policy and to consider your options for protecting the policy from bankruptcy. It may be helpful to work with a financial professional to determine the best approach for your situation.


There are several steps you can take to protect your life insurance policy from bankruptcy:


  1. Consider a trust: One option is to set up a trust to hold your life insurance policy. By doing so, the policy will not be considered part of your estate and will not be subject to bankruptcy proceedings.

  2. Name a beneficiary: Another option is to name a beneficiary for your life insurance policy who is not you or your estate. This will ensure that the policy proceeds are paid directly to the beneficiary and are not subject to bankruptcy proceedings.

  3. Review your policy regularly: It is important to review your life insurance policy regularly to ensure that it still meets your needs and to make any necessary changes. This can help to protect the policy from bankruptcy by ensuring that it is up to date and in good standing.

  4. Consider purchasing a "payable on death" policy: Some life insurance policies are designated as "payable on death" (POD) policies. These policies allow you to name a beneficiary who will receive the policy proceeds upon your death, regardless of any bankruptcy proceedings.

It is important to carefully consider your options and to work with a financial professional to determine the best approach for protecting your life insurance policy from bankruptcy.

Deepak Sharma

Deepak Sharma

Insurance Advisor / WealthGuard


  • My goal is simple, protect what is important to you. I focus my energy on discovering your exposure to risk and building a comprehensive plan to protect you against those risk.