Which of the following statements is true regarding the proceeds of a life insurance policy?

The statement regarding the protection of proceeds against the insured's and beneficiary's creditors is true because, in New Jersey, life insurance policy proceeds are generally exempt from claims by creditors after the death of the insured. This protection is designed to ensure that beneficiaries receive the funds intended for them without the risk of those funds being seized to pay off the obligations of the insured or the beneficiaries themselves.

This means that if a policyholder passes away, the money from the life insurance policy goes directly to the designated beneficiaries and is safeguarded from being diminished by creditors seeking repayment from the insured's debts. This protection fosters financial security for the beneficiaries, allowing them to utilize the funds for their intended purpose, such as covering funeral expenses, paying off debts, or supporting living expenses.

Understanding this aspect of New Jersey’s laws surrounding life insurance helps clarify the importance of proper estate planning and how assets can be structured to protect loved ones from financial burdens. The other statements do not accurately represent the protection afforded to life insurance proceeds or the regulations surrounding their access or tax implications.