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Suicide and Life Insurance

Life insurance covers policyholders in the event of their death, paying out a certain lump-sum to named beneficiaries. Unlike other types of insurance, the event of a claim tends to be hit or miss - after all, you’re either alive or dead. This is why the payout rates on life insurance are so much higher than other insurance products. With the average payout of life insurance providers being around 97% one can see that it’s only a small amount of claims made that go unpaid. Some of those unpaid claims are made up of incorrect information given on application (erroneous medical history for example), or pertain to exclusions on the insurance policy itself.

One common exclusion in a life insurance policy is in relation to suicide. This circumstance is traumatic, difficult to deal with and obviously a terrible thing for anyone and those whom it affects to go through. Unfortunately there are particulars within life insurance policies that mean death as a result of suicide can be an excluded, and a payout forfeited. However, that does not mean it is excluded in every event. In this article we will look at Suicide in relation to life insurance.

Is a Life Insurance Payout guaranteed in the event of the Policyholder’s suicide?

The way a life insurance policy operates is determined by its policy wording, and whilst insurers might offer the same general claim triggers in life policies - I.e. it will pay out in the event of the policyholder’s death - the specifics might be more nuanced. In this way, it’s pertinent to see how suicide is treated within most life policies.

In short, a life insurance payout is not guaranteed in the event of the policyholder’s suicide. However this does not mean it is completely ruled out either. The clause that is relevant to this circumstance usually states that suicide is not a covered event - IF it occurs within a certain time period. Let’s look at the vanilla wording you might see in reference to this.

What does the typical suicide clause look like?

Here are clauses from three notable life insurance providers:

“The Insurer won’t pay a claim if the Life Assured commits suicide within the first 12 months of the policy start date.”

“We won’t pay out a claim as a result of:

  • suicide;
  • an event where, in our reasonable opinion, the insured person took their own life, or
  • an event which, in our reasonable opinion, was intentionally caused by and/or arranged by the insured person and which resulted in their serious self-injury,

in so far as any of the above circumstances occur:

  1. within 12 months of the policy start date;
  2. within 12 months of the date a policy is reinstated, and
  3. within 12 months of a benefit amount being increased (except where the increase occurred under the indexation option), but only for the increased amount.”

“We won’t pay a claim for Life Cover if:

  • The cause of your claim is the result of intentional self-inflicted injury within 12 months of the date your cover started or restarts.”

What this essentially says is suicide is not a covered claim under most life insurance policies - ONLY however if it happens with the first 12 months of the policy. After that time period, suicide WILL be a covered peril.

What if suicide occurs within a joint life insurance policy?

Of course the situation becomes trickier if this scenario occurs on a joint policy. Many of the insurance contracts we looked at did not make it clear what would happen in such a circumstance but we found one that said the following:

“In the event of suicide in the first 12 months of a joint policy, the policy would cease. The remaining life would be offered a single life policy based on their application at the time they applied for the joint policy, at a cost equal to their part of the joint life premium.“

Effectively nothing would really change: the joint policy would switch to a single one, seemingly without being detrimental to the surviving policyholder’s coverage benefits.

Substance Abuse, Mental Illness and Life Insurance

An addiction to drugs and alcohol can sometimes be a factor when a person takes their own life, as can mental illness. This being the case, one might wonder how this impacts life insurance claims. Delving into numerous policy wordings, drugs, alcohol and substance abuse and mental illness is not directly mentioned, so any death and subsequent life claim in relation to these is not expressly excluded. There are two ways this can have an affect on your policy however:

Monthly Premiums

A life insurance premium is calculated depending upon a number of parameters: age, medical history, BMI and other things. Questions will be asked about an applicant’s use of drugs, how much alcohol they drink, and if they’ve had a history of mental illness. Admitting to these things does not mean a life policy will be automatically rejected. In all probability it will increase your monthly premium - there might also be some additional conditions that come with your policy. Whilst it might increase your premiums, one cannot understate the importance of providing honest and truthful answers to your application papers.

Making a Claim

The 3% of claims that were not paid out in life insurance included those in relation to erroneous or misleading information on an applicant’s policy form. It turns out most of those inaccuracies were on questions surrounding drug use and alcohol intake. Life insurers want to provide their customers with a product they know they can trust and will get their family through one of the most difficult times of their life. However, insurance companies are able to discover quite quickly if information pertaining to a life claim was absent from the policyholder’s application form. Doing so might not only reduce your life insurance payout, but it may void the contract entirely. This will result in no payout, and no return of premium for any of the months that have been paid.