26-15-129. Exemption of proceeds; life insurance.

(a) If a policy of insurance is executed by any person on his own life or on another life, in favor of a person other than himself, or except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to that person, the lawful beneficiary or assignee thereof, other than the insured or the person executing insurance or executors or administrators of the insured or the person executing the insurance, are entitled to its proceeds, including death benefits, cash surrender and loan values, premiums waived and dividends, whether used in reduction of premiums or otherwise, excepting only where the debtor, subsequent to issuance of the policy, has actually elected to receive the dividends in cash, against the creditors and representatives of the insured and of the person executing the policy, and are not liable to be applied by any legal or equitable process to pay any debt or liability of the insured individual or his beneficiary or of any other person having a right under the policy, whether or not:

(i) The right to change the beneficiary is reserved or permitted; and

(ii) The policy is made payable to the person whose life is insured if the beneficiary or assignee predeceases that person, and the proceeds are exempt from all liability for any debt of the beneficiary existing at the time the policy is made available for his use.

(b) However, subject to the statute of limitations, the amount of any premiums paid for insurance with intent to defraud creditors, with interest thereon, shall inure to their benefit from the policy proceeds; but the insurer issuing the policy is discharged of all liability thereon by payment of its proceeds in accordance with its terms, unless before payment the insurer receives written notice at its home office, by or in behalf of a creditor of:

(i) A claim to recover for transfer made or premiums paid with intent to defraud creditors;

(ii) The amount claimed along with facts as will assist the insurer to ascertain the particular policy.

(c) For the purposes of subsections (a) and (b) of this section, a policy is payable to a person other than the insured if and to the extent that a facility-of-payment clause or similar clause in the policy permits the insurer to discharge its obligation after the death of the individual insured by paying the death benefits to a person as permitted by the clause.