Even if a suicide victim has a insurance policy, it is difficult to make a financial decision for loved ones. Although life insurers will pay out in certain instances, some contractual disqualifiers may exclude policy beneficiaries from receiving a death benefit.
What is the best way to cover suicide with life insurance?
In many cases, life insurance will cover a policyholder’s suicide death. Some policies in life insurance include suicide and contestability clauses that must be canceled before a suicidal person is covered. Exclusionary clauses usually have a two to three year term. They also include stipulations regarding death benefit payouts. These clauses can be canceled at any time, but beneficiaries will still be eligible to receive the policyholder’s death benefit.
What is a suicide clause in life insurance?
A suicide clause can be in effect for up to three years after the policy’s effective date. The clause allows for investigation into the death of the policyholder during this period.
If an insurer can prove that a policyholder committed suicide within the specified period or if a law enforcement officer or medical examiner declares that the policyholder died as a suicide victim, they may deny the beneficiary’s claim for the life insurance death benefit.
What is an incontestability clause in life insurance?
The contestability clause covers the circumstances surrounding a policyholder’s passing and is usually applicable for the first two years. The contract allows insurers to deny claims due to a wide range of reasons.
Once the contestability clause is expired, the incontestability clause takes effect. Only serious infractions can be grounds for denial. There are many reasons for a claim being denied.
The exclusionary period starts to run when the policy is changed, even if it does not change. Converting two life insurance policies with different payout values to one policy will result in an additional exclusionary period lasting two to three years.
The exclusionary period can be reset by converting from a whole life insurance to a term insurance policy, but not by maintaining the same death benefit.
The contestability and suicide clauses must have expired and there is no evidence that fraud or misrepresentation has been made. If the suicide clauses expire, the death benefit should be paid to the beneficiary.
What does group life insurance do to treat suicide?
Group insurance is a type of coverage that can be provided as a benefit to employees. It pays a death benefit for suicide claims, without the two year contestability restriction.
A contestability clause is likely to apply in the case of private purchases of supplemental insurance. These policies are usually offered by an employer, professional association, or other entity. Insurers have a broad discretion in denying claims within the first two years after the effective date of the policy.
What does life insurance coverage do for suicide?
The policy will pay a death benefit to the beneficiary if the policyholder is killed by suicide after the exclusionary period.
Suicide of a policyholder during an exclusionary period does not result in the payment of the death benefit. Life insurers will often pay the premiums paid for the policy, less any premiums owed prior to the policyholder’s passing. On permanent policies, insurers may also deduct loan amounts.
What should you do if your insurance company denies your claim for life insurance?
Life insurance companies typically allow law enforcement and medical examiners to determine the cause of death for policyholders. If an insurer suspects that the insured died from suicide or other uninsurable causes, it can contest or deny claims within the exclusionary period.
In such cases, the insurers are responsible for proving that the policyholder committed suicide. The company has the right to conduct its own investigation and take into account relevant information.
- Report on autopsy
- Certificate of death
- Addiction to drugs or alcohol
- Evidence of illegal behavior
- Witness testimony or family members
- Your health history, medications, and psychiatric records
- Possible suicide note
- Weapons purchases
If policy beneficiaries disagree with the conclusion of an investigation that suicide was found during the contestability period and receive a denial of a claim for an insurable cause, they can contest the decision. This could include legal action. Although there are many murky situations, such as death due to an overdose of prescribed medication, it is possible to contest a denial and receive some payment.
Avoid applying misrepresentations
Insurers have the right to challenge any claim on a policy that is based on fraud if policyholders misrepresent their mental and physical health. A claim for a policy from a smoker who claims to be smoke-free may be denied if the insurer discovers that the cause of death is smoking-related.
Consult state laws
Certain states have insurance laws that provide protections for beneficiaries. You can check the state laws regarding life insurance contestability to determine exclusion periods. There are also restrictions on contesting contracts that vary by state, which limit the ability to reverse a denial. Some states also restrict the use of suicide clauses in policies that have been converted.
Questions frequently asked
Which is the best type of life insurance?
The best life insurance policy will be determined by the individual policyholder’s needs. Term life policies offer coverage for a short time. Typically, they last between 5 and 30 years. Whole life (permanent policies) provide coverage until the insured’s death. Talking with an agent or financial planner can help you decide the right coverage type.
How much premium are you required to purchase life insurance?
Many life insurance policies can be paid either in monthly or annual installments. There are many plans offered by different insurers. The cost for life insurance differs depending on the policyholder’s particular circumstances and the amount of coverage they select.
Is life insurance available to cover the ‘death without dignity’?
A person may be able to end their life legally and freely if they are deemed terminally ill. Some states have laws that protect the insured from their death being considered suicide. This allows a doctor to prescribe life-ending medication without fear of retribution. “Death with dignity” is permitted in:
- California
- Colorado
- District of Columbia
- Hawaii
- Maine
- Montana
- New Jersey
- Oregon
- Vermont
- Washington
It is considered suicide if an insured is a citizen of one of these countries and decides to exercise their right of dying. Therefore, the policy should cover aid-in-dying, even if it happens during the suicide clause exclusionary time.
