Life insurance

[Evilmoo]

Hi

We are considering an IVA and I have a question

We have a life insurance policy which pays out if one of us dies. If (god forbid) anything happened to one or both of us during the iva would the proceeds be taken to pay off the full debt?

Our debt is £59k and the insurance is £50k. If this was the case, surely there's no point in paying for the insurance!

Thanks

[Niobe]

Hi,

If your insurance does have to pay out (hopefully not!!) then the proceeds would go towards paying off the debts of the deceased person. The surviving partner would still have to continue with theirs as far as I'm aware.

[nickjohn]

When we had our creditors meeting we had life insurance, the creditors said the monthly premium was to much and we could only keep life ins if we reduced the monthly amount.. We now have policies which pay out burger all if we die and have so many exclusions they are not really worth having...

If its a life policy and you have a will then the proceeds will go to your surviving partner, if it is a joint IVA then this will be a windfall and 100% has to be paid in, given the circumstances it could be a F&F settlement...

Not sure how IVA's work with regards to death, guess it would fail and the creditors would then try and make claims against the estate.. again not sure how a claim would work if you have willed any items, like a share of a house, to a surviving partner..

[Shining]

Maybe one of our experts can give an answer a little later

[Evilmoo]

It's a joint policy so will automatically pay out to the surviving partner or to our children if we both went at the same time (touching wood now lol)

We don't have any other assets at present

[mole]

I had assumed (probably wrongly) that if I died our joint life insurance policy would pay out to my wife. As she is not in an IVA she would not need to pay anything?

[Foggy]

It depends upon how the policy is set up. My understanding is that if it pays out to the spouse directly, this money is theirs. If it pays into the deceased's estate then it will get eaten up paying the deceased debts etc.

[Ryan]

Hi,

If you place your life insurance policy in to Trust to your wife, then no creditors can touch it

[MelanieGiles]

But if both parties are in an IVA, the surviving partner will receive a windfall which will have to be included in their IVA.

[Evilmoo]

Thanks for answering Melanie

My IVA terms states that if one of us dies then it will be cancelled so how does that work with the insurance?

[Evilmoo]

Sorry that should have been 'our' IVA as it's joint

[GilliB]

Hi Evilmoo. I'm with Payplan and in my agreement it states that an insurance policy has been taken out to cover the payments in the event of my death. Have a look at your proposal to see if there's anything similar.

[Evilmoo]

In the proposal it states

" I have a life insurance policy. This has no surrender value and is excluded from the arrangement"

???

[MelanieGiles]

It is possible therefore that any proceeds from the policy may be outside of the IVA, but on death the IVA will probably terminate and therefore the proceeds of the policy still become available to creditors.

[Evilmoo]

I have to say this actually puts me off doing the IVA.

Had the paperwork this morning to say the creditors meeting has been arranged for 15th August but I don't want to think our life insurance would be taken should the worst happen.

Our children are only 13 & 16 so the surviving spouse would really need the money

Hmmmm will have to give it some deep thought