S 0405 General Bill, By Saleeby, Land, McConnell, M.F. Mullinax and T.H. Pope
 A Bill to amend Section 38-63-40, Code of Laws of South Carolina, 1976,
 relating to life insurance for an insured's spouse, children, and dependents
 and claims of the insured's creditors, so as to revise the provisions for the
 creditors' rights under life insurance policies and provide for the claims of
 creditors of the insured under various other insurance contracts.

   01/09/91  Senate Introduced and read first time SJ-13
   01/09/91  Senate Referred to Committee on Banking and Insurance SJ-1

A BILL

TO AMEND SECTION 38-63-40, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO LIFE INSURANCE FOR AN INSURED'S SPOUSE, CHILDREN, AND DEPENDENTS AND CLAIMS OF THE INSURED'S CREDITORS, SO AS TO REVISE THE PROVISIONS FOR THE CREDITORS' RIGHTS UNDER LIFE INSURANCE POLICIES AND PROVIDE FOR THE CLAIMS OF CREDITORS OF THE INSURED UNDER VARIOUS OTHER INSURANCE CONTRACTS.

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. Section 38-63-40 of the 1976 Code is amended to read:

"Section 38-63-40. The proceeds (A) Proceeds, avails, and cash surrender value values of life insurance in the aggregate amount of not more than fifty thousand dollars upon the life of an individual, which has already been or may be taken out, in which it is expressed to be for the primary benefit of the insured's spouse, children, or dependents inure to the use and benefit of the individual or individuals for whose use and benefit it is expressed to be taken out, and the sum or net amount of the insurance becoming due and payable by the terms of the policy is payable to the individual or individuals as stated in this section, free and discharged from the claims of the representatives of the insured or of any of the insured's payable to a beneficiary or assignee other than the insured or applicant are exempt from creditors or a person claiming by, through, or under him or them or any of them unless:

(1) the policy was obtained of the insured or applicant whether or not the right to change the beneficiary is reserved and whether or not the policy is payable to the insured if the beneficiary dies first. Premiums paid with the intent to defraud creditors; or

(2) the creditor or representative possesses a valid assignment of the cash surrender value of the policy from the policyholder on a separate form.

In these two instances, the creditor may recover from either the cash surrender value or the proceeds of the life insurance policy of the amount secured by the assignment, with interest, are subject to their claims out of the proceeds.

(B) Proceeds of insurance or annuity contracts, by agreement, may be held by the insurer exempt from claims of the beneficiary's creditors. (C) Proceeds of group insurance contracts are exempt from claims of the creditors of the insured. (D) Benefits of accident and disability contracts are exempt from claims of the creditors of the insured."

SECTION 2. This act takes effect upon approval by the Governor.