What Can Life Insurance Be Used For After Payout?

What Can Life Insurance Be Used For After Payout? After payout, life insurance proceeds can have much use aside from being a security for the insured’s family. For one, life insurance may be the only testament of the insured. Life insurance, in a way, is a bequest.

In the said policy, the insured somehow gives and bequeath the proceeds to the person he designated as his beneficiary or beneficiaries. And as long as the latter can prove that there are no legal impediments over his designation as a beneficiary, he will get the proceeds even if some oppose his appointment.


Life cover can also be used to offset the delinquent taxes of the insured. When a person dies, the first thing the government of any state does is to make sure that his estate taxes and other delinquent taxes are paid before his estate can be divided within his heirs.

Thus, if the payout is the only property in possession of the insured, the government may force the liquidation of such insurance to proceed and order that the same be used to offset the delinquent taxes of the insured. The excess of the payout will be the only amount left for the beneficiaries or heirs.

Life cover insurance can also be used to compensate the insured’s debts. It can be done in two ways. The first way is if the creditor was the one who took out insurance for the insured.

If the insured dies, the creditor will be entitled to a sum equivalent to the insured’s debt. The second way is if the insured died leaving his debts and has no sufficient property to compensate the same. The creditor may file before the courts for his claims to be included in the probate proceedings or partition of the debtor’s properties. Since the insurance proceeds will be part of the properties of the decedent, then it may be used to compensate the creditor.

Life cover can also be used as a trust fund after payout. This usually happens when the beneficiaries of the insured are his minor children. The proceeds will not be given directly to the little children. If the insured had designated a guardian on his own, the insurance proceeds would be given in trust to the guardian. However, if the insured did not select a guardian, the court may appoint a relative or a guardian ad litem for the minor children. The insurance proceeds, especially if it is a large sum or if the guardian cannot afford the guardianship bond, will be deposited to a bank as a trust fund for the minor children.


Life insurance can also be converted into a pension. Some insurance companies allow this conversion, especially if the beneficiary is already old. This is because the old-aged beneficiary may not have the capability to manage the large sum of money independently.

Thus, the beneficiary, on his own or through a court order, may petition that the payouts for the insurance be converted into pensions so he can manage it well.

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