In the vast majority of cases when a person passes away and is covered by life insurance, the amount written into the policy is paid to their beneficiaries. Once the company has paid the life insurance settlement per the policy the recipients will be responsible for paying any expenses realized by the individual’s death. However, in some cases there may be questions surrounding the veracity of the information submitted on the insurance application and the life insurance settlement may be less than the face value of the policy.
There are also times, especially with whole life policies, where the policy owner has taken out a loan against the policy. In this event, the life insurance settlement would be for the face value of the policy minus the amount of the loan still owed and any associated costs of administrating the loan. Remembering that the policy holder is not always the same as the insured named in the policy.