Life Insurance & Suicide: Will You Still Get Coverage?

Taking out life insurance is an excellent way to financially secure your loved ones after your death. This comes in the form of a lump sum that beneficiaries can enjoy entirely tax-free. However, in the event of a suicide, there’s a chance that the insurer won’t pay out the death benefit.

Presently, suicide is among the leading causes of death in the United States. In the last 13 years, the rate at which suicide occurs jumped a tremendous 60%. Despite its tragic nature, some insurance agents will deny a claim if suicide is declared the cause of death. Whether or not your death benefit remains intact will depend on your policy's suicide clause.

If you or someone you know is suffering from suicidal thoughts, seek help by calling the National Suicide Prevention Hotline at 1-800-273-8255 (TALK).

Does Life Insurance Cover Suicide?

Whether or not a life insurance company covers suicide depends on their specific policies and each case's unique circumstances. If a life insurance company chooses not to release the money because the insured person committed suicide, a loved one or beneficiary may still be able to receive benefits under the following circumstances:

An employer provided free group life insurance, or the individual purchased a policy through the workplace.
The insurance policy has been active for more than two years.

Typically, insurance companies may withhold the death benefit if the policy was purchased within two years before death. This period prevents people from potentially abusing insurance terms and taking out policies with the intent to cash them out immediately.

Life Insurance & Mental Health Issues

Most types of life insurance (e.g. term life) are medically underwritten, which implies that an individual's mental health matters just as much as their physical condition. Though a psychological diagnosis won't prevent your ability to secure a policy, it may influence the rates set by your life insurance company.

Depression Diagnosis

During a medical examination, an insurer might ask questions regarding the type of diagnosis, specialist referrals and hospital admissions, the regularity of symptoms, type of medication, and taking time off work. Providing your mental health history will allow an insurer to calculate the risk involved in your policy.

An insurer will likely bump up your premiums if:

You're on multiple types of medication, including antipsychotics.
You've been hospitalized due to your diagnosis.
You're suffering from related issues such as drug or alcohol abuse.
You've previously attempted suicide.

If you've ever undergone an annual medical to retain your position with a company, you'll know that pre-existing conditions don't receive coverage. Mental illnesses that could be considered pre-existing include:

Bipolar disorder
Clinical depression
PTSD
Addiction
Postnatal depression
Anxiety

Unfortunately, most life insurance companies don't look favorably upon individuals with a history of suicide attempts or severe psychological conditions. If approved, your policy may outline certain conditions that you have to meet before your family can file claims. This could include an exclusion clause if suicide is declared as the cause of death.

Assisted Suicide

Some healthcare providers will facilitate physician-assisted suicide – also referred to as "death with dignity" or "right to die" – if a terminally ill patient decides they'd rather not suffer through the physical and financial burdens of treatment. Currently, assisted suicide is only legal in California, Oregon, Vermont, Colorado, and Washington.

Assisted suicide adheres to the same clause and doesn't protect individuals within the first two years of taking out the policy.

Accidental Death

Some medical examiners will wrongfully conclude a death a suicide instead of an accident due to poorly-worded clauses and exclusions. If an insurance claim is denied without support, a beneficiary can pursue a settlement with the help of a legal professional.

Life Insurance Clauses For Suicide

Two clauses dictate the eligibility for life insurance payouts: suicide provision and incontestability. By enforcing these clauses, an insurance company minimizes the risk that someone will commit suicide immediately after purchasing a policy, just to leave money to a beneficiary.

Both clauses can be present in a single life insurance policy, though one may end before another. Here’s a breakdown of each.

Suicide Provision Clause

A suicide provision pertains to the conditions and specifics regarding payouts if the insured person commits suicide. An insurer will use this clause to identify limitations within the policy, especially if you suffer from a mental health condition.

It's essential to disclose your mental health information before you buy life insurance to avoid it becoming invalid. However, some life insurance policies are forgiving of applicants who get diagnosed after the initial purchase and don't increase rates.

This clause is narrowly-focused and can last up to three years. Should the policyholder commit suicide within this period, the insurance company can investigate the death under reasonable suspicion, usually with the help of a medical examiner and law enforcement.

Incontestability Clause

An incontestability clause allows an insurer to dispute or deny a life insurance claim if the cause of death is suicide. Unlike a suicide provision, an incontestability clause may take into account validity issues other than the manner of death. It lasts roughly two years, after which an insurance company can no longer reject a request.

In rare cases, there are exceptions to the incontestability clause, including:

Unintentional information errors on a life insurance application, such as the incorrect age or gender. An insurer can't reject this claim entirely but may become obliged to adjust rates.
Contestability periods shorter than two years
Instances of omitting or providing false information and insurance fraud

Timeline

If you're planning to replace your existing life insurance policy to change your coverage, the two-year period on your contestability and suicide clauses restart.

Instances Of Payout

Typically, all life insurance policies release a payout after the contestability period, regardless of the circumstances. However, provisions may vary. You should always closely examine any exclusions.

During the exclusionary two-year period, some insurers will only release money equal to the premiums paid, minus any remaining balances. On permanent policies, such as whole life and universal life, insurers will also subtract unpaid loan amounts.

Individual vs Group Insurance

Suicide cases are handled differently depending on the type of insurance purchased. Typically, permanent and term life insurance policies enforce a suicide provision clause. This contestability period can last from one to two years, depending on the state where the policy was purchased.

On the other hand, group life insurance won't implement any suicide clauses. Thus, even in suicide, beneficiaries will receive full entitlement to the intended death benefit. However, this won't apply to employees who purchase policies through their workplace.

Denial Of Claims

Insurers can void death benefits if suicide occurs. Sometimes, the reason for denial is pretty straightforward, like if the death occurred within the two-year contestability period. Other times, insurance companies may suspect discrepancies in the death certificate, autopsy report, suicide note, or history of illegal behaviors. Note that instances of alcohol or drug overdose may also call insurability into question. Whatever the case, the burden of proof is the responsibility of the insurance company.

How To Contest Denial

Life insurance companies want to cut costs and minimize risk as much as possible. Though it can be tempting to omit information that may affect your rates, it’s best to be transparent about any existing health conditions or special circumstances.

Never misrepresent information regarding your physical or mental health on your application. Simply excluding a smoking habit for the sake of a lower life insurance quote can easily result in a denied claim.

Protect your beneficiary by consulting state laws. By knowing the implications and restrictions of a contestability clause, there is less room for misunderstanding and less chance of your death benefits being withheld.

Alternatives To Life Insurance Policies That Require Medical Underwriting

Every whole/term life insurance policy requires an applicant to disclose their medical history and undergo a health examination. If you fail to qualify for whole/term life insurance, alternatives include the following:

Simplified Issue Life Insurance

Simplified insurance aims to provide insurance coverage as quickly as possible. This policy is an attractive option because it supplies up to $100,000 without extensive medical testing. There’s also no suicide clause.

Simplified life insurance is ideal for adults who are court-mandated to purchase a life insurance policy immediately, require collateral for a specific loan, or otherwise can't qualify for standard whole/term life insurance.

Guaranteed Life Insurance

Guaranteed life insurance will almost always approve an application, even if the individual isn't in prime health. These policies don't impose a suicide clause or medical exam. However, in place of a suicide clause, guaranteed life insurance imposes graded benefits, which will refund premiums instead of releasing the death benefit within the two-year mandated period.

Keep in mind that a guaranteed policy will offer much lower life insurance benefits at much higher premium rates. These types of policies typically don’t guarantee more than $25,000.

Group Life Insurance

A group policy is provided by employers and typically amounts to two or three times an employee's salary. Because it doesn’t require a medical exam, group life insurance is an attractive option for higher-risk individuals.

However, employees have little to no control over the coverage they receive and will have to get supplemental insurance if they want more from their policy. Group life insurance is not permanent either – since your life insurance policy is provided by your employer, you have to give up your coverage when you resign or switch jobs.

In Conclusion

If a family member commits suicide, the tragedy can feel impossible to navigate. Things get even more stressful when life insurance policy beneficiaries can’t claim the money they’re entitled to. But suicide doesn’t always void insurance claims – depending on when the insured person bought the policy, the insurance company may still choose to release benefits.

If you’re wondering how to claim life insurance benefits in the wake of suicide, contact us at Wesley Insurance, LLC.