It’s not always easy to think about but it’s important to know about life insurance and suicide.
The suicide of a loved one is difficult enough without the problem of a denied life insurance claim. In the aftermath of a death in the family, there is sadness, anger, and grief. Then there are the practical problems of arranging the funeral and informing family and friends of the tragic news.
Every family wants to avoid the added worry of whether the life insurance company will pay out. Therefore, as difficult as this process can be, it’s important to deal with as soon as possible.
Young or old, the tragedy of suicide isn’t something which can be predicted.
Even if you are young and in perfect health, suicide could someday touch any of our lives. According to the American Association of Suicidology, 6.5 million people in the U.S. were in some form exposed to suicide in 2015 alone. Furthermore, according to the CDC (Centers for Disease Control and Prevention), there were more than 44,000 instances of suicide in the U.S. in 2015.
Although it may be the last thing that comes to mind, it’s important to know about life insurance and suicide. Life insurance and suicide could affect you and your loved ones.
First of all, it’s useful to understand the terminology used by insurance companies. There are two important clauses in relation to life insurance and suicide. These are incontestability clause and the suicide clause.
Life Insurance, Suicide and the Incontestability Clause
To understand life insurance and suicide you need to know about the incontestability clause. That’s where we’re going to start. All life insurance policies include waiting periods. The waiting period applies to the incontestability clause.
It’s useful to note that this clause stipulates that there is a waiting period, which is known as the contestability period. In this period the insurance company can deny or contest an insurance claim. The contestability period is usually upheld for between two or three years from the start date of the coverage.
Keep in mind that the exact time period depends on the insurance carrier.
It is also important to note that if a new insurance policy is taken out, the clock resets and the contestability period restarts, so don’t get caught out by this.
Insurance companies do this to reduce the risk of financial losses. For example, in circumstances of fraud or misrepresentation or misstatement of information on the insurance policy application. This is particularly relevant for the issue of death by suicide.
The insurance company wants to ensure that people are deterred from taking out a life insurance policy to secure payment for their beneficiary following a planned death. If this can be proven by the insurance company, the policy is void and the payment would be denied.
Misrepresentation of information includes many things. For example, if the insured person does not disclose on their application that they suffer from mental illness or if they have a drug habit. If they subsequently commit suicide, it could result in the claim being deemed void by the insurance company and payment would be refused.
A famous example of this is in the aftermath of the death of, the actor, Heath Ledger in 2008. He starred as the Joker in the Dark Knight.
He reportedly took out a life insurance policy worth around ten million dollars just seven months before his tragic death. He named his three-year-old daughter as the beneficiary. His death was later deemed as an “accident, resulting from the abuse of prescribed medications”, by the authorities.
The suspicious circumstances of his death led to questions about life insurance and suicide.
Did Ledger commit suicide? And if he did, did he have a drug addiction that, significantly, was not mentioned on his life insurance application?
An investigation and subsequent lawsuit resulted in the case being settled for less the original entitlement of $10 million. The money is in a trust until his daughter is eighteen.
In this case, we do not know the full story, and may never know. However, the story illustrates the complex nature of contestability periods, life insurance and suicide.
According to the National Association of Insurance Commissioners (NAIC), if the suicide takes place within the contestability period, then there would likely be an investigation and the insurance company would contest the claim. In some cases, the insurance company will pay back all of the premiums to the beneficiaries, and that’s all. On the other hand, even this may not happen.
However, it’s almost never the insurance company that conducts the investigation. They also don’t determine whether someone was murdered or if they committed suicide. This is left to law enforcement and medical experts.
There have been examples of people who have died under suspicious circumstances and the insurance company has refused payment.
In such circumstances, families of the deceased have been forced to seek legal advice. Mostly, these cases are settled out of court. Families eventually accept a significantly lower payment than the original policy described.
After the contestability period is over, the policy becomes incontestable. In other words, after this period the insurance company cannot contest or deny the life insurance claim. However, in exceptional circumstances, such as instances of fraud, the policy may be ruled contestable again.
Therefore, the question arises, do life insurance policies cover those whose cause of death is suicide?
Life Insurance and Suicide and the Suicide Clause?
That leads us to the second clause, known as the suicide clause. There is a common myth about life insurance and suicide. Many people assume that life insurance does not cover death by suicide.
This misunderstanding is related to the suicide clause. People believe that the suicide clause states that the insurance claim is void if the cause of death is suicide.
However, this is not always the case.
Many life insurance companies are willing to cover for suicide. It is stated in each suicide clause whether this particular policy includes death by suicide.
The suicide clause also includes a waiting period. In this period, death by suicide is not covered by the policy. This waiting period is also usually within two years. It can be a shorter or longer period though.
Again, if a new policy is taken out, then the clock resets and the two year period restarts.
If your insurance policy includes the suicide clause, the claim could be denied according to the terms and conditions of the clause.
Check your policy about life insurance and suicide. It is usually stated in the policy whether the death benefit covers suicide.
After the suicide, clause period is over and as long as there is no other suicide clause, the insurance company will pay. This means that the death benefit will be paid to the beneficiaries of the insured person.
It is important to consider that when you purchase any life insurance policy, the insurance company is required to run through all of the clauses, terms, and conditions of your policy. This includes the particular exclusions of the policy, such as death by suicide.
Life Insurance without Waiting Periods
There are life insurance companies that claim to offer no waiting period. However, these will nearly always include clauses that cover the company against suicide or the non-disclosure of health problems.
The waiting period has benefits for both the insurance company and the person taking out the policy.
If a person is considering suicide but wants to ensure that their family doesn’t suffer financially, then taking out a life insurance policy could seem a good solution. The waiting period prevents the person taking their life for financial gain. The two-year period may be enough time for the person to reconsider.
Know Your Rights!
You need to know your rights when it comes to life insurance and suicide.
It’s worth pointing out that insurance companies are not trying to get out of paying for life insurance all the time. Although does suggest this is the case.
In fact, the American Council of Life Insurers states that 99% of life insurance claims are paid in full by insurance companies. That includes examples of life insurance and suicide.
Life insurance policies are complicated documents and the fine print is not easy to make sense of. It is important to confirm with your life insurance provider the exact details of your policy.
It may also be that while you understand the terms and conditions of your life insurance, it is also important that your beneficiary is also clear on the details of your policy.
By purchasing life insurance through an independent life insurance agency, you will be safe in the knowledge you can always ask questions about your policy.
That’s why Top Quote Life Insurance is there to help. Are looking to apply for life insurance? Or do you simply want a life insurance quote?
Even if you are just looking for information about life insurance or life insurance and suicide.
If someone you know is thinking about suicide, help is available. To speak to someone immediately you can call the National Suicide Prevention Lifeline at 1-800-273-8255.