20-1131. Exemption of life insurance proceeds
and cash values from creditors
A. If a policy of life insurance is effected by any person on the person's own life
or on another life in favor of another person having an insurable interest in the policy,
or made payable by assignment, change of beneficiary or other means to a third person,
the lawful beneficiary or such third person, other than the person effecting the
insurance or the person's legal representatives, is entitled to its proceeds against the
creditors and representatives of the person effecting the insurance.
B. Subject to the statute of limitations, the amount of any premiums for insurance
paid in fraud of creditors, with interest, shall inure to their benefit from the proceeds
of the policy, but the insurer issuing the policy shall be discharged of all liability on
the policy by payment of the proceeds in accordance with its terms, unless before payment
the insurer received written notice by or in behalf of some creditor, with specification
of the amount claimed, claiming to recover for certain premiums paid in fraud of
creditors.
C. For the purposes of subsection A, a policy shall also be deemed to be payable to
a person other than the insured if and to the extent that a facility-of-payment clause or
similar clause in the policy permits the insurer to discharge its obligation after the
death of the individual insured by paying the death benefits to a person as permitted by
the clause.
D. If, for a continuous, unexpired period of two years, a policy of life insurance
has named as beneficiary the insured's surviving spouse, child, parent, brother, sister
or any other dependent family member, then, in event of bankruptcy or in any proceeding
before any court in this state, the cash surrender value of the insurance, in the
proportion that the policy names any such beneficiary, shall be exempt from claims and
demands of all creditors, other than a creditor to whom the policy has been pledged or
assigned, and except that, subject to the statute of limitations, the amount of any
premiums which are recoverable or avoidable by a creditor pursuant to title 44, chapter
8, article 1, with interest, shall inure to their benefit from the cash surrender value.
For the purposes of this subsection, "dependent" means a family member who is dependent
on the insured for not less than half support.
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