Discover how the life insurance suicide clause affects payouts. Learn about exclusion periods, contestable clauses, and what to do if your claim is denied.
Life insurance, like all insurance, is based on statistics. Insurance companies use detailed actuarial tables that tell them the likelihood of any event they include in their policies. One of these statistics is the likelihood of suicide.
Policies handle suicides differently based on the company’s assessment of this risk. However, a typical policy will include clauses to protect the company from policyholders who have a specific plan to commit suicide after purchasing the policy to trigger a payout to their beneficiaries.
Insurers use suicide clauses to balance these interests. Specifically, suicide clauses are meant to protect insurers from what they consider borderline fraud against fairness to policyholders and beneficiaries.
Does Life Insurance Pay Out if the Policyholder Commits Suicide?
You should review your life insurance policy to determine the benefits, if any, your beneficiaries will receive after suicide. In some situations, the policy will not address suicide. In these policies, the insurer should pay after any death, including one by suicide.
In most situations, the policy will include a suicide clause that defines whether the policy pays after a suicidal death and, if so, whether the term imposes any time restrictions. A suicide clause typically allows the beneficiaries to receive the full life insurance benefit for death by suicide, but only if it occurs outside of a time window defined in the policy.
For example, a common suicide clause blocks benefits for any suicidal death that occurs within two years of the policy’s effective date. Conversely, the policy pays full benefits for a suicidal death occurring more than two years after that date. Just keep in mind that there is no standard suicide clause, so your suicide clause may differ.
Reasons Why Life Insurance May Not Pay Out After a Suicide
On the one hand, suicide is a tragic but inescapable fact in many families. According to the National Safety Council, Americans have a one in 87 chance of dying by suicide. Insurers will inevitably have many policyholders who die by suicide.
On the other hand, insurance companies want to avoid clients who take out insurance policies as part of a specific plan to commit suicide. In the eyes of the insurer, this plan borders on fraud because the policyholder skews the odds against the actuarial tables when they have already determined the manner and timing of their death.
To avoid this problem, insurance companies impose several limits on when they will pay death benefits. The policy term must be unexpired, and the premiums must be paid. These requirements apply to all deaths, not just those where suicide is known or suspected.
Insurers also impose several requirements meant to catch anything that unfairly influenced their decisions to issue policies, including:
Misleading Information
When you apply for life insurance, your application helps the insurer determine whether to issue the policy and, if so, how much to charge. As you would expect, certain high-risk factors, such as smoking, might lead to a denial or increased premiums. While it may be tempting to lie, a fraudulently obtained life insurance policy might not pay benefits upon death.
Specifically, life insurers can ask about prior suicide attempts and mental illness history. If you lie, the insurer was fraudulently induced into issuing the policy.
Life insurance policies typically include a contest clause (or contestable clause) that allows the insurer to pause the benefit payment until it can investigate the death, verify the facts represented in the application, and possibly deny benefit payments. In rare situations, the insurer may even reopen a case and try to claw back beneficiary payments. This situation might happen when the policyholder made fraudulent representations that materially affected the insurer’s decision to issue the policy and pay the benefits.
Incomplete Information
Life insurance companies assess your risks at the beginning of the policy. You might not have lied when you left a question blank, but you still might have influenced the insurer’s decision to issue the policy. In most cases, the insurer’s underwriter will catch any blank questions on new applications; however, it might not be as careful when you renew your coverage or apply for additional coverage.
By leaving a question blank, you imply that nothing has changed since your original application. However, if this is not true, you must disclose it or risk non-payment of benefits upon your death.
Thus, suppose your original term life insurance application was 100% accurate and complete when you filed it. However, during the term, you were diagnosed with depression, and when the term expired, you prepared a renewal application and failed to disclose the diagnosis. Even though you did not affirmatively lie on the application, withholding the diagnosis affected the insurer’s decision and, worse yet, the failure to disclose might provide a reason for refusing to pay benefits if you ultimately die by suicide.
Insurance Policies Vary in Rules Concerning Payouts for Suicide
There is no way to predict how a suicide will affect the life insurance policy you or a loved one purchased because every policy is unique. One factor that affects how a policy handles suicide is the policy type. The following types of policies cover different fatal events and, as a result, may handle suicides differently:
Accidental Death
Insurers categorize deaths into natural, accidental, and intentional. Natural death results from disease or aging. Accidental deaths happen due to unintentional fatal injuries, and intentional deaths are suicides.
Interestingly, accidental deaths generally include homicide but exclude suicide because “intent” refers to the policyholder’s intent. One area where insurers will draw a line between suicide and accidental death occurs after an overdose. To avoid any disputes about whether an overdose was intentional or accidental, many accidental death policies exclude all drug overdose deaths from coverage.
If the policy is silent, the insurer may investigate whether the overdose involved illegal drugs or validly prescribed drugs and how the overdose occurred. If the insurer classifies the death as suicide or the result of criminal activities, it may deny payment.
Military Life Insurance
Military life insurance is unique because most policies contain no exclusions. Specifically, they tend to cover all deaths, including suicide, without any limitations.
Traditional Life Insurance
Traditional life insurance policies may exclude suicides altogether or, more often, include a suicide clause that only excludes suicides that occur within a defined period. For example, a suicide clause might have an exclusion period ranging from one to three years. If a suicide happens after the period ends, the insurer will pay the benefits.
Group Life Insurance
Group policies often come with your health insurance policy or are provided by your employer. These policies usually include a suicide clause. You should review your policy to understand its stance on suicides and the exclusion period.
How Long Do You Have to Have a Policy Before It Pays Out for Suicide?
Insurers can define any exclusion period for a suicide clause. Once the exclusion period ends, the insurer cannot deny benefits for a suicide. However, it can contest payments at any time if it believes the policyholder gave false, misleading, or incomplete information in the original application.
Thus, clearing the suicide exclusion period removes one obstacle but does not guarantee a benefit payment.
How Contestable Clauses Work
If the policyholder dies by suicide, the beneficiaries must overcome two hurdles. First, the suicide must fall outside any exclusion period. Second, the policyholder must have satisfied the terms of the insurance contract, including the following:
- Answering questions on the application fully and honestly
- Paying premiums
- Dying outside of any waiting or exclusion period
Contestable clauses allow the insurer to hold up benefit payments while it investigates the application and the circumstances of the death. It typically gives the insurer a fixed amount of time, such as two years, to contest payments by either denying them or paying less than required by the policy’s terms.
Is Death by Euthanasia Considered Suicide?
Some states have laws that allow doctor-assisted suicide. These death-by-dignity laws shield doctors who help people end their lives. The insurer typically cannot exclude physician-assisted suicide as long as the suicide clause is satisfied.
What Is the Slayer Rule?
The slayer rule is a state law that excludes any beneficiary from being paid life insurance benefits if they caused the policyholder’s death.
For example, suppose someone staged a policyholder’s homicide to look like a suicide. If a police investigation determines that a beneficiary caused the death, the insurance company must exclude that beneficiary and either pay other beneficiaries or the deceased person’s estate.
What Do I Do if My Insurance Claim Was Denied?
Insurers usually have an internal process for reviewing claim denials. You can follow this procedure to have the claim denial reconsidered by the insurer. If the insurer persists in the denial, you may need to litigate the claim.
You can usually invoke this process if the insurer denies the entire claim or denies part of the claim and pays less than the beneficiaries expected.
How Can a Lawyer Help if My Claim Was Denied?
Lawyers have experience reviewing and interpreting life insurance policies. They can determine whether the insurer has grounds for denying the claim or if you have arguments for overcoming the denial. An insurance lawyer can guide the appeal through the administrative process and, if litigation becomes necessary, file a complaint.
When life insurers deny claims, they disrupt the policyholder’s plan for providing for their family. Fighting the insurer is often the only way to get them to satisfy the policy terms.