Suicide Clause Life Insurance

When does life insurance cover suicide? How do life insurance payouts work for suicide?

8 min read
By Prerna
Suicide Clause Life Insurance
Photo by Ravi Roshan / Unsplash

According to the most recent studies from the National Center for Health Statistics, suicide rates in the United States are rising at alarming rates, with a 35 per cent increase between 1999 and 2018. Suicide is defined as self-inflicted harm that results in death, but suicide has far-reaching consequences. It's a perplexing tragedy for those left behind, particularly those left to deal with the deceased's estate following a heartbreaking loss. When suicide is the cause of death, it has far-reaching implications for life insurance policies.

According to the National Mental Health Institute, women's suicide rates were highest between 45 and 54, while men's suicide rates were highest between the ages of 65 and older. These are the age groups who are more likely to get life insurance, but what precisely does that imply? Is a person's life insurance policy still valid if they commit suicide? Will your loved ones continue to be beneficiaries of your life insurance policy and get their benefits?

We will explore the answer to these and other questions in this article.

When does life insurance cover suicide?

Suicide is all too common, unfortunately. According to the American Foundation for Suicide Prevention, suicide is the tenth-largest cause of death in the United States, costing $69 billion in 2015 alone, along with self-injury. Many life insurance contracts include additional provisions to account for suicide in the fine print.

Insurance companies usually need you to have an active policy for at least one to two years, either through your private insurance or one offered by your company. If you commit suicide, you might find that a portion of your premiums is repaid to a beneficiary. According to the American Council of Life Insurers (ACLI), 99 per cent of all life insurance claims are paid in full; nevertheless, whether or not suicide is the cause of death, you must be fully paid up premium-wise obtain benefits.

The Suicide Provision

A suicide provision, sometimes known as a suicide clause, is usually included in a life insurance policy. This section explains the specifics of your coverage if you choose to commit suicide. If a suicide occurs before the policy's exclusion limit, the beneficiaries may not be eligible for benefits. The duration of this provision is usually two years. However, it may be longer or shorter depending on your insurer.

Other regulations require you to report any mental health or addiction difficulties. You run the risk of invalidating your policy if you don't. When these problems arise after you've already purchased your policy, insurance providers are more lenient. After-acquired insurance, you may be protected against a rate rise if mental health is disclosed, depending on your carrier. However, if you have a history of mental illness, you may not be authorized by a new provider.

Although your insurer's approach to mental health may differ, it's critical to be aware of these limits before purchasing coverage.

The Incontestability Clause

The Incontestability Clause lasts typically two years and confirms things like the information you submitted on your application to secure the validity of your coverage. After a certain amount of time has passed, the insurance company will no longer be able to refuse your claim due to a paperwork error (under the assumption that the error was unintentional and not fraudulent).

In some specific cases, there are exceptions to the incontestability clause, including:

  • Incorrect age or gender – While an insurer cannot deny a claim because the policyholder gave an erroneous age or gender, the rates may be changed to reflect the correct age/gender.
  • Short-term contestability – In some circumstances, insurers can specify a waiting time of 1-2 years before receiving reimbursements. When a policyholder is mentally or physically ill at the time of application and dies before the contestability period expires, this applies.
  • Evidence of willfully misleading or lying to your insurer –The incontestability clause does not apply to insurers in the event of fraud, and the policy may be cancelled.

It's vital to note that in the event of suicide, the incontestability provision may impact compensation.

Life insurance and depression

Underwriters consider various characteristics unique to each person before issuing a life insurance policy, including health, age, personal and family medical history, approximate weight, and lifestyle habits. Insurers typically ask you to divulge your medical history, including any mental health-related issues such as anxiety, depression, or stress, and physical wellness checks. Your underwriter can also look up what prescriptions or medications you've taken or are currently taking in your records.

It's always preferable to be open and honest about your medical issues. Unless you are terminally ill and considered high risk, having an anxiety illness or depression will not preclude you from acquiring life insurance. You will typically obtain a better rating and lower premiums if your condition is under control with treatment and medication or if your depression is caused by a specific life event, such as postpartum depression.

Insurers will strive to understand your condition as much as possible. Therefore it is dependent on the circumstances of each applicant. However, misrepresenting your health can result in a higher premium or a policy denial from your life insurance company. Furthermore, in the event of your death, your life insurance company may reduce or deny the amount paid to your family.

Life insurance and physician-assisted suicide

Physician-assisted suicide, often known as "death with dignity," refers to terminally ill persons receiving fatal dosages of medication from medical doctors to terminate their lives. Under the Death with Dignity Act, only eight states and Washington, D.C. now have laws safeguarding the right to assisted suicide. These states may disregard the contestability clause and grant compensation in the event of physician-assisted suicide by an applicant.

Life insurance payouts for physician-assisted suicides are comparable to suicide payouts in some states. Most life insurance plans have a contestability provision, which states that if the policyholder commits suicide within two years of acquiring life insurance, the insurance company will not payout. However, the policy may pay out when two years have gone by.

If you're honest about your medical conditions on your application, especially if you have a terminal illness, your life insurance company may or may not grant you coverage. However, if you lie about your medical issues, the policy may be cancelled due to fraud, with no benefits notwithstanding any premiums paid. If you want to get a life insurance policy that would eventually offer a death benefit to your dependents, it's far preferable, to be honest and truthful.

How do life insurance payouts work for suicide?

A life insurance company will examine your physical and mental health before issuing a policy. This is a part of the underwriting process, and it will involve several questions about your present and previous health.

Conditions like depression help insurers estimate your risk of death or injury. While proof of therapy and medication will not likely result in coverage refusal, it will make insurers feel more comfortable insuring you despite pre-existing depression and mental health concerns. If you don't tell your insurance company about these illnesses ahead of time, they may be able to refuse to pay out if your death is self-inflicted.

Individual policies vs. group policies

If you get life insurance via your work, you may be able to skip the suicide provision and be guaranteed full coverage regardless of a suicide death. Because most corporate life insurance plans do not include suicide restrictions, your loved ones should have a much simpler time filing a claim than they would with a privately held policy.

That isn't to say there won't be any restrictions. Most company insurance has a one- or two-year waiting period after purchase, comparable to individual policies.

While your human resources department is usually the best place to go for help with coverage and claims, management can also offer advice and education on your group policy.

Contesting life insurance claims denial

Insurance companies may try to withhold your beneficiaries' death benefits regardless of the cause of death. Heath Ledger, the Academy Award-winning actor who died in his early twenties in January 2008, was well-known. Even though the official cause of death was acute intoxication, his $10 million life insurance policy was denied due to "suspicious death." Matilda Ledger, Ledger's daughter, had to go through a long and drawn-out legal battle to get a tiny portion of her father's wealth.

Jane Pierce, a Montana, widow, was refused benefits from her husband's insurance policy due to uncertainty regarding his medication. Even though some medicines were found in his system due to his chemotherapy, the insurance company claimed it was a failed suicide attempt and refused to pay benefits to his wife. Pierce earned nearly a quarter of a million dollars after filing a lawsuit. Still, the insurance company never admitted any fault, and Pierce never received interest on the delayed monies.

If your beneficiaries wish to receive anything from your estate in the event of your suicide, they may face an uphill battle. Insurance firms have a reputation for lowering expenses in whatever manner they can.

The takeaway

Suicide isn't usually a deal-breaker for life insurance policies, so read the acceptable language carefully.

  • Each year, the number of people who commit suicide in the United States rises.
  • Many life insurance companies include provisions in their policies to cover the potential of suicide.
  • The Suicide Provision lasts typically two years, and if suicide occurs within that time, any life insurance payouts are invalid.
  • The Incontestability Clause gives your insurer a limited time to challenge any information you submit on your application.
  • Depression and mental health will be significant factors in the underwriting process, and your coverage rates may be affected.
  • Employer group policies frequently exclude the Suicide Provision.
  • When it comes to suicide, beneficiary payouts are ultimately determined case-by-case basis.

Despite suicide, most life insurance policies will still payout. However, it's typically a long, convoluted process that adds to the burdens of already overburdened recipients. Benefits may be cut or refused entirely, leaving your loved ones without financial assistance. Take the time to go over your policy with your beneficiaries so that they are aware of the finer points and restrictions of your life insurance coverage. This is crucial knowledge to have if your claim is denied.

Life insurance and suicide FAQs

Does life insurance cover death by suicide?

A "suicide clause" is included in most life insurance plans. This means that the beneficiaries will not get the payoff if the policyholder commits suicide within the first two years of the insurance. However, this varies by state.

Will I be denied life insurance if I have depression?

If you have depression, you will not necessarily be denied life insurance unless you are terminally ill and considered high risk. Because most insurers strive to empathize with policyholders, eligibility for coverage is mainly determined by the nature of your depression, your medical history, whether you're receiving treatment and the circumstances that led to your depression. It is usually essential to be open and honest about your medical conditions to avoid future issues.

What is the impact of the incontestability provision on suicide and insurance?

To ensure the validity of your policy, the applicant must hold it for two years under the incontestability clause. After two years, the insurance company loses the power to deny your claim due to misrepresentation or concealment in documents. After two years, if a policyholder commits suicide, the insurance company is usually required to pay up under the incontestability provision.

How does physician-assisted suicide affect life insurance payouts?

Physician-assisted suicide payout conditions are often identical to suicide payout conditions. Most life insurance plans have a contestability provision, which states that if the policyholder commits suicide within two years of acquiring life insurance, the insurance company will not payout. On the other hand, the death benefit is usually valid after two years.