If You Commit Suicide, Will Life Insurance Pay?

Life insurance payouts in the event of suicide are often misunderstood. This article clarifies how life insurance policies generally address suicide, providing factual information to policyholders and beneficiaries.

The Suicide Clause

Most life insurance policies include a suicide clause, which is a provision designed to prevent individuals from purchasing a policy with the immediate intent of taking their own life for financial gain. This clause typically specifies a period during which the death benefit will not be paid if the insured dies by suicide. The common duration for this clause is two years from the policy’s effective date.

If a suicide occurs within this initial two-year period, the life insurance company usually will not pay the full death benefit. Instead, only the premiums paid into the policy will be refunded to the beneficiaries. This prevents adverse selection.

However, if the insured’s death by suicide occurs after this two-year exclusionary period, the life insurance company is generally obligated to pay the full death benefit to the designated beneficiaries. If a policy is updated or a new policy is purchased, the suicide clause period typically restarts from the effective date of the new policy. Policyholders should review their specific contract terms, as state laws and individual policy language can introduce variations.

Contestability Period and Misrepresentation

Distinct from the suicide clause, life insurance policies also contain a contestability period, typically lasting two years from the policy’s effective date. During this period, the insurer has the right to investigate the accuracy of information provided by the applicant on their insurance application. This clause protects insurance companies from fraud or material misrepresentation.

If the insurer discovers that the policyholder made material misrepresentations—such as providing false information about their health, medical history, or lifestyle habits—that would have influenced the company’s decision to issue the policy or the premium charged, they may deny a claim. This denial can occur even if the death is not due to suicide or if the suicide clause period has passed. For example, failure to disclose a significant pre-existing health condition could be considered a material misrepresentation.

After the contestability period expires, the policy generally becomes “incontestable,” meaning the insurer can no longer dispute the policy’s validity based on misrepresentations, except in cases of proven fraud. While both the suicide clause and contestability period can lead to claim denials within the initial years of a policy, the contestability period focuses on the truthfulness of the application, rather than the cause of death.

Filing a Life Insurance Claim

When a policyholder dies, beneficiaries contact the life insurance company to initiate the claims process. This involves notifying the insurer of the death and requesting claim forms. The primary documents required are a certified copy of the death certificate and the completed claim form. The death certificate verifies the date, time, and cause of death.

In cases where the death is due to suicide, the insurer will conduct a more thorough investigation, especially if the death occurred within the policy’s initial years. This investigation helps determine if the suicide clause or contestability period applies. Insurers may request additional documents such as police reports, coroner’s reports, or medical records to understand the circumstances surrounding the death. While the claim process can take between 30 to 60 days, it might take longer if the death falls within the contestability or suicide exclusion period due to the investigation.

If a claim is denied, the insurer must provide a written explanation. Beneficiaries may have options to appeal the decision if they believe it was made in error or if there are mitigating circumstances.

Reviewing Your Policy Documents

Understanding the specific terms of a life insurance policy is beneficial for policyholders and their beneficiaries. Each policy is a legal contract, and its wording regarding suicide clauses and contestability periods can vary. It is advisable to locate and read these sections within the policy document.

Policyholders should review their life insurance coverage regularly, at least annually or after significant life events, to ensure it aligns with their current needs. If any terms are unclear, contacting the insurance agent or the company directly for clarification is a prudent step.