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Does Life Insurance Pay for Suicidal Death?

June 01, 2023
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Suicide is a painful subject. For many of us, such deep suffering is unimaginable. If a loved one dies by suicide, the family isn’t likely to be emotionally or financially prepared to organize a funeral. If that loved one had life insurance, their family may wonder, “Does life insurance pay for suicidal death?”

Whether or not the insurer pays the benefit depends on a few factors:

  1. What type of life insurance policy was it?
  2. How long has the policy been active?
  3. What was the insured’s state of mind at the time of suicide?

Table of Contents:

What Type of Life Insurance Policy Was It & How Long Had It Been Active?

In situations involving suicide, it’s important to know if your loved one had an individual life insurance policy or group life insurance through their employer. This differentiation holds significant weight as it can determine whether the life insurance payout will be made or not.

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.

Suicide clauses typically state that death benefits will not be paid out if the insured dies by suicide within the first two years (or one year in some states) of the policy’s activation. However, the insurance company usually refunds the premiums to the beneficiary.

There are a few other scenarios to be aware of:

  • If the policy was permanent and had any outstanding loans against the cash value, then the insurer subtracts that from the premiums paid and any excess goes to the beneficiary.
  • If the insured 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 insurer is required to pay out a death benefit no matter what.

Group Life Insurance Policy:

Group life insurance policies don’t always contain suicide clauses. If a voluntary life insurance policy is purchased through an employer, however, then this policy most likely contains a suicide clause.

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.

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. In New York, for example, the death benefit will be paid if the insured dies in the two year period and 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:

Suicide of the insured, while sane or insane, within two years of the issue date, is not covered by this policy. In that event, we will pay only the premiums paid to us minus any unpaid policy loans.

The Contestability Period & Suicide Clause

All life insurance policies have an incontestability clause which states that after a maximum of two years has passed the insurer cannot void the policy due to any misrepresentations on the application.

The contestability period allows an insurance company to investigate the validity of a life insurance policy during the two year period. They 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.

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.

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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 additional 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.

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