You may be wondering whether Life Insurance Proceeds are Exempt Under NJ Banking Law. The answer is yes, provided certain rules are met. Under New Jersey bankruptcy laws, proceeds from life insurance policies can be exempt from being paid to creditors. Exemptions from life insurance include those that are received as a benefit of military service, fraternal benefits, and group insurance policies. In addition to life insurance, other types of insurance policies are exempt, including disability benefits, disability payments, and health or disability benefits.
Federal and state exemptions are available to people in New Jersey bankruptcy cases. However, they have their limitations, so these exemptions are not as extensive as the federal exemptions. In New Jersey, real property, mobile homes, life insurance contracts, and certain types of government benefits are exempt. These exemptions are extremely important for people facing bankruptcy and trying to keep as much of their property as possible.
The government recognizes the importance of life insurance, and therefore has passed laws that make some types of life insurance exempt. While term life insurance policies do not mature until death, permanent life insurance policies do. These policies are exempt under NJ Bankruptcy Law if they remain in force and provide a death benefit to your beneficiaries. In addition, cash values are protected by state statutes.