Suicide is a painful subject. If a loved one who was insured by life insurance dies by suicide, then whether or not the policy’s benefit is paid depends on a few factors:
- What type of life insurance policy was it?
- How long has the policy been active?
- What was the insured’s state of mind at the time of suicide?
Life Insurance and Suicide: What Type of Policy Was It? How Long Has It Been Active?
An Individual Life Insurance Policy:
Most individual life insurance policies have suicide clauses built into them. A suicide clause is put in place to protect against people who might apply for life insurance with the intention of committing suicide.
The typical suicide clause states that the policy will not pay out death benefits if the cause of death is suicide within the first two years of the policy being active. Some states limit this to one year.
If someone insured by life insurance dies by suicide within this time period then the insurance companies are not obligated to pay the death benefit. The insurance companies typically will, however, return the premiums to the beneficiary that the policyowner paid. If the policy was a permanent policy that had any outstanding loans against the policy’s cash value, then the insurance company would first subtract what was owed from the premiums paid and any excess would go to the beneficiary.
If someone insured by life insurance dies by suicide after the suicide clause time period has expired, then the insurance company will pay out the death benefit.
If the policy did not include a suicide clause then the life insurance company is required to pay out a death benefit if the insured dies by suicide, no matter when.
A Group Life Insurance Policy:
Group life insurance policies don’t always contain suicide clauses. If an insured individual dies by suicide and has both an individual policy and group coverage, it is possible that the group policy will still pay out a death benefit even if suicide occurs within the first couple years of activation. If a supplemental life insurance policy is purchased through an employer, however, then this policy most likely contains a suicide clause.
Life Insurance and Suicide: What Was the Insured’s State of Mind?
Some states determine whether a death benefit is payable for suicide based on whether or not the person was sane or insane at the time of death. The state of New York, for example, will still pay the death benefit, even within the two year period, if the person was deemed insane at the time of suicide.
It has been argued that if an insurance company does not specify that insanity is included in the suicide clause then they should be required to pay. To protect themselves, most insurance companies specifically mention this. A sample suicide clause reads as follows:
Life Insurance Policy Contestability Period and Suicide Clause
All policies have an incontestability clause which states that after a specific amount of time has passed (a maximum of two years) the insurance company is prohibited from voiding the policy due to any misrepresentations on the application. However, during this early time period the insurance company is allowed to investigate.
This contestability period allows an insurance company to investigate the validity of a life insurance policy during the two year period. The insurance company can review the application for any inaccuracies and “contest” the validity of the policy if they discover misrepresentations. If the insured dies during the contestability period and misrepresentations are discovered, the insurance company has the option to reduce or deny the death benefit claim altogether.
Actor Heath Ledger’s death in 2008 is a well-known example of how complicated a death benefit payout can become as the result of suspected suicide. He purchased a $10 million life insurance policy in 2007 and died six months later. The death was determined to be an accidental drug overdose, but the insurance company had the right to investigate further since the policy’s two-year contestability period was still active.
The insurance company was suspicious of the death and wanted to investigate whether or not the suicide clause was applicable. The company was also concerned that Mr. Ledger may not have been completely truthful on his life insurance application when asked about his drug and alcohol use.
A lawyer from the Ledger estate filed suit against the insurance company arguing that Ledger’s daughter was owed the life insurance death benefit. In 2009, an undisclosed settlement was finally reached.
Even if your loved one dies of suicide, no matter how long after the policy was activated, still send in a death claim. If the claim is denied, return of premiums is still typically owned to the beneficiary.
The typical suicide clause states that the policy will not pay out death benefits if the cause of death is suicide within the first two years of the policy being active.
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Applying for Life Insurance with History of Attempted Suicide
Applying for life insurance with a history of attempted suicide can raise your premiums. There are many factors that the insurance company will evaluate to determine a) if they will approve you and b) what your premiums will cost.
Life insurance underwriters will want to know information including:
- Any previous suicide attempts
- Any co-existing mental illness or personality disorder
- Social situation (marital status, occupation stability, financial position)
- Any co-existing physical illness(es), especially chronic persistent pain
- Any alcohol or drug abuse
- Access to means, i.e. guns or drugs
- Family history
If there has been more than one attempt or if it has been less than five years since the attempt, a life insurance company will often add a flat extra onto the premium. This is when the premium is increased by a certain dollar amount per thousand dollars of insurance coverage for a certain period of time.
For example, if someone was applying for $500,000 of term life insurance and attempted suicide 3 years ago, the insurance company may offer them a Standard premium with a $5 flat extra for two years.
Let’s say the Standard premium for the policy was an annual rate of $450. With a $5 flat extra for a $500,000 policy, this individual would be required to instead pay $2,950 (5 x 500 + 450) annually for the first two years. Then the flat extra would drop off and the annual premiums would be the standard $450.
A flat extra is used when there may be extra risk to the insurance company for a temporary period of time. Statistically, the risk of further attempts is highest in the first year and remains high for a period of time. This is why the insurance company is likely to add on a flat extra.
There are many resources available if you or someone you know is thinking about suicide:
- The National Suicide Prevention Lifeline offers 24/7 free, confidential support: 1-800-273-TALK (8255) or visit the website to chat online.
- The Veterans Crisis Line provides confidential support for veterans and their families: 1-800-273-8255, press 1; or text to 838255; or start an online chat.
- The Crisis Text Line offers free 24/7 support for people in crisis. Text HOME to 741741.
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