Can a bankrupt buy an insurance policy?

QUESTION

I came across your blog recently, and found out your contact. I would like to take this opportunity to clarify some doubts about certain insurance matters.

If one is declared bankrupt, is he still eligible to purchase insurance? Or does he need to seek permission from the relevant authority (Official Assignee) before doing so?

If one purchased insurance without the permission, what are the possible consequences? e.g. in the event of claims, would his claims be confiscated?

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REPLY

When a person becomes a bankrupt in law everything he owns (including his insurance policies) becomes the property of the Official Assignee.

He cannot buy an insurance policy without the permission of the Official Assignee.

The Official Assignee can and may give permission to a Bankrupt to buy a reasonable protection policy (i.e. a Term Policy) for the benefit of the bankrupt’s family. This permission has to be given in writing.

A simpler way to address the problem is to get the spouse to buy a policy on the life of the bankrupt. In which case the policy will be owned by the spouse and not the bankrupt and the official assignee will have no say over the policy.