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Question for the Money Doctors

Question submitted on Apr 24, 2014.

Question

While married to my ex wife she became the owner of my sons policy. Her stepson. She then took out a loan on it court awarded me the policy back upon divorce now I am getting billed for the loan and the intrest altought divorce papers say I am not liable What can I do?

Answer

Hi. When a person takes a loan against a life insurance policy, that loan reduces the death benefit of the insurance policy. For example, if a policy has a $100,000 death benefit and a $50,000 loan is taken against, that death benefit is now only worth $50,000. The same goes for the cash value.

If you expected to get the full death benefit of the life insurance policy in the divorce, her loan may have reduced what you were entitled to. If that is the case, I would call your attorney to resolve the matter.


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