Life Insurance Payouts After Suicide: What Families Need To Know

Life insurance is a sensitive topic, especially when it comes to suicide. While it's a difficult subject to approach, understanding how life insurance policies handle such situations is crucial for ensuring that your loved ones are protected financially. The good news is that, in most cases, beneficiaries can still receive a life insurance payout if the policyholder dies by suicide. However, there are certain conditions and exclusions that may impact whether the claim is approved or denied.

Life insurance policies often include a 'suicide clause'

Life insurance policies often include a suicide clause that prevents the insurer from paying out the claim if the insured's death was due to self-inflicted injury within a certain period from the start of the policy. This period is known as the exclusion period and typically lasts for the first one to two years that the policy is in force, but can be as long as three years. The clause is intended to prevent individuals from taking out a policy with the intention of ending their life shortly afterward, leaving financial benefits for their loved ones.

During the exclusion period, if the policyholder dies by suicide, the insurer may limit or deny the death benefit payout. Instead, they might only return the premiums paid up to that point. After this exclusion period ends, the life insurance policy generally covers suicide, and beneficiaries are entitled to receive the full death benefit.

It's important to note that changing a policy, such as adding coverage or converting a term policy into a whole life policy, can reset the clock, and the exclusion period will start over. Therefore, it's beneficial for policyholders to be aware of this clause and its potential implications for their beneficiaries.

Group life insurance, often provided by employers, usually includes similar suicide clauses to those found in individual life insurance policies. However, some group life insurance policies, such as those provided by the military, do not include a suicide clause, and beneficiaries will typically receive the death benefit regardless of the cause of death.

Suicide clauses typically last for two years

Suicide clauses, also known as suicide provisions, are standard in life insurance policies. These clauses limit the payment of benefits to survivors of a policyholder who dies by suicide within a certain period after purchasing the policy.

The exclusion period, as it is commonly known, typically lasts for two years, during which insurance companies do not pay a death benefit. After this period, the policy's beneficiaries can receive a death benefit if the covered person dies by suicide. This clause is designed to prevent an individual from taking out a policy with the intention of ending their life soon after.

While most states enforce a two-year exclusion period, some states, such as Colorado, Missouri, and North Dakota, have shorter periods of one year. Changing a policy, such as adding coverage or converting a term policy to a whole life policy, can reset the exclusion period.

It is important to note that group life insurance policies, often provided by employers, usually do not contain a suicide clause. In these cases, beneficiaries will typically receive the death benefit if the covered person dies by suicide.

Group life insurance policies may not include a suicide clause

Group life insurance policies, which are often provided as part of an employee benefits package, may not include a suicide clause. This means that if the policyholder dies by suicide, their beneficiaries will typically still receive the death benefit.

This is in contrast to individual term life insurance policies, which usually include a suicide clause that prevents the insurer from paying out the claim if the insured's death was due to self-inflicted injury within a certain period, typically two years, from the start of the policy. If the policyholder dies after the exclusion period has ended, the beneficiaries are entitled to the full benefit.

It's important to note that supplemental life insurance purchased through an employer usually has a standard suicide clause and contestability period. The benefits administrator should be able to provide accurate information about a specific plan.

The absence of a suicide clause in group life insurance policies is an important distinction that can provide financial protection for beneficiaries in the event of a policyholder's suicide. It's beneficial for individuals to understand the specific clauses and conditions of their life insurance policies to ensure that their loved ones receive the intended financial support in the event of their death.

Contestability periods can also affect a claim

The contestability period helps protect the insurance company from fraud and confirms that the policyholder did not withhold or lie about any health or lifestyle-related information during the application process. It is also separate from the suicide clause.

If a policy lapses due to non-payment of premiums, the contestability period will restart if the policy is reinstated. Additionally, making changes to a policy, such as adding coverage or converting a term policy into a whole life policy, can also reset the clock on the contestability period.

Changing a policy can restart the suicide exclusion period

Changing a life insurance policy can restart the suicide exclusion period. This means that if you make changes to your policy, such as adding coverage or converting a term policy into a whole life policy, the exclusion period will start over. For example, if you switch from a term life insurance policy to a whole life insurance policy with the same death benefit, there will be no new contestability period. However, if you switch from two term life insurance policies to a single policy with a larger face value, the suicide and contestability provisions will begin again.

The suicide exclusion period typically lasts for the first one to two years of a policy, depending on the insurer and state regulations. During this time, if the policyholder dies by suicide, the insurance company may limit or deny the death benefit payout. Instead, they might only return the premiums paid up to that point. After this exclusion period ends, the life insurance policy generally covers suicide, and beneficiaries will receive the full death benefit.

It's important to note that different types of life insurance policies may have specific clauses and conditions that impact coverage. For example, group life insurance policies, often provided as part of an employee benefits package, typically include similar suicide clauses to those found in individual life insurance policies. On the other hand, military-focused life insurance policies, like those offered by Veterans' Group Life Insurance (VGLI) and Servicemembers' Group Life Insurance (SGLI), usually pay out the death benefit regardless of the cause of death.

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