Many people think that when they die, their debts die with them. This is exactly what happens for some individuals who don't have an estate to leave behind, but the debts of people who do have assets when they die will have to be paid following very specific guidelines.
One thing to remember is that the life insurance policy isn't considered part of the estate. The beneficiaries of the policy don't have use the proceeds to pay off any of the debts of the decedent.
The debts and many other estate-related tasks are handled by the administrator of the estate. You should realize that with very few exceptions, the relatives of the person who passed away won't have to cover the debts.
One of the only instances in which the debts would need to be paid would be if the account is a shared account or if someone co-signed for the account. In these cases, the person who was listed on the account would need to pay for the debts.
This doesn't mean that creditors won't try to force family members of the person who died to pay the debts. You must remember that this is completely voluntary.
If the decedent was married, it is up to the surviving spouse to determine if he or she wants to remain in a home that still has a mortgage on it. If that spouse remains, he or she will have to pay the mortgage. Selling the home to pay off the mortgage and moving to a new place is the alternative option.
Determining which debts must be paid is a difficult task for some estates. It might be beneficial to work with someone who is familiar with the process.
Source: FindLaw, "Debts After Death," accessed Nov. 02, 2017