40-414. Exemption of interests in policies; exceptions.
40-414
40-414. Exemption of interests in policies; exceptions.(a) If a lifeinsurance company or fraternal benefit society issues anypolicy of insurance orbeneficiary certificates upon the life of an individual and payable at thedeath of the insured, or in any given number of years, to any person orpersons having an insurable interest in the life of the insured, the policyand its reserves, ortheir present value, shall inure to thesole and separate use and benefit of the beneficiaries namedin the policy andshall be free from:
(1) The claims of the insured or the insured's creditors and representatives;
(2) the claims of any policyholder or thepolicyholder's creditors and representatives,subject to the provisions of subsection (b);
(3) all taxes, subject to the provisions of subsection (d); and
(4) theclaims and judgments of the creditors and representatives of any personnamed as beneficiary in the policy of insurance.
(b) The nonforfeiture value of a life insurance policy shall not be exemptfrom:
(1) Claims of the creditors of a policyholder whofiles a bankruptcy petition under 11 U.S.C. § 101 et seq. on orwithin one year after the date the policy is issued; or
(2) the claim of any creditor of a policyholder ifexecution on judgment for the claim is issued on or within one year afterthe date that the policy is issued.
(c) Nothing in this section shall be construed as restricting theright of the insured to change the beneficiaryif the policy reserves that right to the insured.
(d) Nothing in this section shall be construed as exempting fromtaxation any real estate which may atany time be carried by any life insurance company as a part of its legalreserve.
(e) The provisions of subsection (b) shall apply only to life insurancepolicies purchased on or after July 1, 1988.
(f) The provisions of subsection (b) shall notapply to that portion of the nonforfeiture value of a life insurance policy, issued on orwithin one year of the filing of a bankruptcy petition under 11 U.S.C. §101 et seq. or an execution on judgment for the claim of the creditor, whichis derived from the surrender of a life insurance policy issued more thanone year prior to such bankruptcy petition or such execution.
History: L. 1927, ch. 231, 40-414; L. 1933, ch. 71, § 1 (SpecialSession); L. 1984, ch. 170, § 1;L. 1988, ch. 217, § 1; July 1.