Personal Finance

Life Insurance payout on joint loan?

  • Last Updated:
  • Jul 30th, 2009 7:45 pm
Jr. Member
User avatar
Nov 30, 2003
146 posts

Life Insurance payout on joint loan?

What happens if you have life insurance coverage on a jointly held loan and one of the borrowers dies?
Does the loan get paid off or does the loan just transfer to the surviving borrower?
1 reply
Jr. Member
Jan 27, 2009
177 posts
Depends if the insurance is directly tied to the loan product (i.e. mortgage life insurance) or if it's a regular life insurance policy that was taken with the purpose of covering said loan. To sum up, who is the beneficiary on the life policy? If it's the bank, the loan will be paid off. If it's the deceased's estate that is beneficiary, then it will be paid to the estate and the debt will flow into the estate aswell, thus cancelling eachother out.

Even if an asset is owned JWROS, the attached debt does not necessarily follow.

The deceased's share of debt on a JWROS asset flows to the deceased's estate, not to the joint owner...

The word "joint" can be confusing, as there are 2 types of ownership, Joint Tenants in Common, and Joints W/ Rights of Survivorship (JWROS) (or simply joint tenancy), having 2 completely different meanings.