Life Insurance Can Actually Cover Suicide. Here's How.
Almost all 99% of life insurance policies pay death benefits to a policyholder's beneficiaries. So, it's pretty much guaranteed that your family will receive a payout when you die.
But how about that 1% of rejected life insurance claims -- are suicide cases among them? Unfortunately for beneficiaries, they are. Insurers can reject coverage for suicide, but only if the suicide happens within a specific period of time.
When Is Suicide Covered?
For every insurance policy, there are two exclusions that dictate if and when suicide is covered.
1) The Suicide Clause
A life insurance company won't pay death benefits if the policyholder commits suicide within a specific period of time after their policy takes effect. In most states, that period is two years.
However, after those two years are up, the suicide clause no longer applies. If the policyholder commits suicide after the clause has expired, their life insurance claim typically can't be contested. Their beneficiaries will likely receive the full payout.
2) The Contestability Clause
Like the suicide clause, the "contestability period" is a two-year window from the date that a life insurance policy takes effect. It says that if a policyholder dies within those first two years, their insurer has the right to investigate their cause of death. During this time, the insurance company can obtain an autopsy report, medical reports, and interviews with family and friends of the deceased.
Suicide Clause Vs. Contestability Clause
The suicide clause deals strictly with what insurers might call "intentional self-destruction" or "death by one's own hand." If a policyholder commits suicide within the time period dictated by the exclusion, the insurer will look for proof that their death was intentional. If it was, beneficiaries won't receive a payout.
On the other hand, the contestability clause applies to any death that happens in the first two years of a policy start date, whether or not it was intentional. Say, for instance, that you die of lung cancer. Your insurer will look through your medical report to see if you have a history of smoking. If you do, and you didn't disclose that to your insurance company, they have a right to cancel your death benefits.
Why Exclude Suicide Coverage?
Insurance policies include a suicide provision to protect insurers. Without the exclusion, a policyholder could buy a policy with the intention of committing suicide. As soon as their policy took effect, they could take their own life, and their beneficiaries would receive the policy's full payout.
That might seem like an outrageous scenario, that someone could be so desperate to ease their family's financial struggles that they'd actually take their own life. But it's happened. Loss of a job, rising debt, a death in the family -- these events might be so devastating, the promise of a life insurance benefit could be the deciding factor for committing suicide. The suicide clause tries to curb that incentive.
If you or someone you know is having suicidal thoughts, there is immediate help. Call the Suicide Prevention Lifeline at 1 (800) 273-8255 or visit www.suicidepreventionlifeline.org.
The Burden Of Proof Is On The Insurer
For a death to be considered suicide, the insurance company has to prove that the policyholder deliberately took their own life. Even if a policyholder's death is declared an accident, insurers still have the right to investigate within the time period dictated by the suicide clause.
Insurers might look at the policyholder's death certificate, autopsy report, or hospital report. They might interview family, friends, and (unfortunately) witnesses. They might also review the deceased's mental health history to see if they had recent psychiatric care, diagnoses of mental illness, a history of suicide attempts or threats, recent changes in behavior, ongoing drug habits, or even receipts for weapon purchases. A suicide note could also offer convincing evidence that the person intended to kill themselves.
What If The Deceased Had Mental Health Issues?
When you apply for a life insurance policy, you'll probably have to get a medical exam or blood test. Considering about 90% of suicide victims have a mental illness, insurers typically require applicants to disclose any history of mental illness and drug or alcohol dependencies.
If you have a history of depression, bipolar disorder, or substance abuse, and you don't tell your insurer, they have a right to cancel your death benefit if you die -- whether or not you committed suicide.
What If They Died Of An Overdose?
For an accidental overdose, the suicide clause won't typically apply. However, if that overdose happens within the "period of contestability," insurance companies have a right to investigate the death. They might conclude from an autopsy or witness testimony that the overdose was intentional, and therefore refuse the policy's payout to its beneficiaries.
If an overdose happens after the suicide clause expires, an insurer might still cancel a policy. Intentional drug overdose could be viewed as "dangerous activity," which is grounds for insurance companies to cancel a death benefit.
They might also find that the person had an ongoing drug habit. If the person didn't disclose the drug habit when they took out the policy, the insurer would consider the application fraudulent. The insurer has the right to cancel the policy.
Know The Terms Of Your Policy's Suicide Clause
For any life insurance policy, the devil is in the details. Before you pick a plan, speak with an agent about its exact exclusions. When you know what's covered in your plan, you can secure your family's future.