Life Insurance Payouts For Suicide Claims: What You Need To Know

Whether or not a life insurance policy covers suicide depends on the type of policy and its specific terms. Many life insurance policies include a suicide clause, which states that if the policyholder dies by suicide within a certain period, usually one to three years, the insurer may deny the death benefit or refund the premiums paid. However, after this exclusion period, most life insurance policies do cover suicide, and beneficiaries are entitled to receive the full death benefit. If a policy does not include a suicide exclusion clause, the insurance company must pay the full death benefit.

Military life insurance policies

Servicemembers' Group Life Insurance (SGLI) is a VA program that provides low-cost group life insurance to military members. If you meet the eligibility criteria, you will be automatically enrolled. SGLI coverage includes Traumatic Injury Protection (TSGLI), which provides financial assistance to members whose loved ones are with them during their recovery from traumatic injuries. TSGLI coverage ranges from $25,000 to $100,000, depending on the nature of the injury.

To be eligible for SGLI coverage, you must meet at least one of the following requirements:

• Be an active-duty member of the Army, Navy, Air Force, Space Force, Marines, or Coast Guard
• Be a commissioned member of the National Oceanic and Atmospheric Administration (NOAA) or the US Public Health Service (USPHS)
• Be a cadet or midshipman of the US military academies or Reserve Officers Training Corps (ROTC)
• Be a member of the Ready Reserve or National Guard and meet certain training requirements
• Be a volunteer in the Individual Ready Reserve (IRR) mobilisation category

Additionally, if you are in non-pay status with the Ready Reserve or National Guard, you may still be eligible for full-time SGLI coverage if you meet both of the following requirements:

• You are scheduled for 12 periods of inactive training for the year
• You are drilling for points rather than pay

Note that if you meet the above requirements for non-pay status, you will need to pay your premiums directly instead of having them deducted from your military pay.

When you leave the military, your SGLI coverage will stay in effect for 120 days. After that, you have the option to convert your SGLI to Veterans' Group Life Insurance (VGLI), a similar program offered by the VA. You have up to one year and 120 days from your discharge to apply for VGLI, and your coverage amount can be up to the amount you had through SGLI.

In addition to SGLI and VGLI, there are other life insurance options available to military members and their families, including:

• Family Servicemembers' Group Life Insurance (FSGLI): Provides term life insurance coverage for spouses and dependent children of SGLI members.
• Service-Disabled Veterans' Insurance (S-DVI): Life insurance coverage for veterans with a service-connected disability who meet certain qualifications.
• Veterans' Mortgage Life Insurance (VMLI): Mortgage protection insurance for disabled veterans who are eligible for a VA Specially Adapted Housing (SAH) grant.

Suicide exclusion period

The suicide exclusion period is a critical aspect of life insurance policies that can significantly impact whether beneficiaries receive their intended financial support. This clause is typically in effect during the first one to three years after a policy is issued, with most states enforcing a standard two-year period. During this time, if the policyholder dies by suicide, the insurer may deny the death benefit payout or limit it to a refund of the premiums paid.

The suicide clause serves to protect insurance companies from financial risk by preventing individuals from taking out substantial policies with the intention of ending their lives soon after, thereby ensuring their beneficiaries receive a substantial payout. While the exact duration of the suicide exclusion period can vary by state and insurer, it generally ranges from one to two years.

After the suicide exclusion period ends, most life insurance policies cover suicide, and beneficiaries are entitled to receive the full death benefit. This means that if the policyholder dies by suicide after the exclusion period, the insurance company is obligated to pay the death benefit outlined in the policy.

It is important to note that switching life insurance policies restarts the suicide exclusion period, even if the new policy is purchased from the same company. Additionally, certain types of life insurance, such as group life insurance and military life insurance, may not include a suicide clause and thus treat suicide differently.

Understanding the suicide exclusion period is crucial for policyholders to ensure their beneficiaries receive the intended financial support in the event of their death. By being aware of this clause and its implications, individuals can make informed decisions regarding their life insurance coverage and ensure their loved ones' financial security.

Incontestability clause

An incontestability clause is a provision in a life or disability insurance policy that prevents the insurance company from canceling the policy based on misstatements in the policy application after the insurance has been in effect for a certain period, usually two years. This clause is one of the strongest protections for a policyholder or beneficiary. While many other legal rules for insurance favour the insurance companies, this rule is notably and strongly on the side of the consumer.

The incontestability clause in life insurance policies is designed to prevent insurance companies from ending coverage due to a misstatement by the insured after several years have passed. It is a consumer protection that helps to protect insured people from firms who may try to avoid paying benefits in the event of a claim. While this provision benefits the insured, it cannot protect against outright fraud.

The incontestability clause was introduced by reputable insurance companies in the late 1800s to build consumer trust. By promising to pay full benefits after the policy had been in place for two years, even if there were errors in the original application, insurance companies tried to clean up the industry's image. This proved successful, and early in the 20th century, state governments began to pass laws requiring insurance companies to include the incontestability clause. Today, almost all life insurance policies contain this provision in some form.

The clock starts to run on the contestability period the moment the life insurance policy is purchased. If, after two years, the insurance company hasn't found an error in the original application, benefits are assured. Even within that period, it's not easy for the company to rescind a policy. Under most state laws, the insurance company must file a suit in court to nullify a contract. Sending a notice to the policyholder is not enough.

There are a few exceptions to the incontestability clause. In most states, if the insured person misstates their age or gender when applying for life insurance, the insurance company may not void the policy, but it can adjust the death benefits to reflect the policyholder's true age. Some states allow insurance companies to include a provision stating that a one- or two-year contestability period must be completed within the lifetime of the insured. This allows the insurance company to refuse to pay benefits if a policyholder was so unwell when they applied for coverage that they died before the contestability period was over. In some states, an insurer can void a policy if deliberate fraud is proven.

Switching life insurance policies

Reasons for Switching

First, it is important to understand why you might want to switch life insurance policies. Your needs may have changed since you initially purchased your policy. For example, your children may have grown and no longer need financial support, or you may have gotten divorced. Alternatively, your income or estate may have increased, and you want a policy that reflects this change. Other reasons for switching could include changing jobs, your current policy ending, changes in your finances, or improvements in your health.

Choosing a New Policy

Before cancelling your current life insurance policy, it is essential to decide what type of policy you would like to replace it with. You will need to choose between term life insurance, which lasts for a set amount of time, and permanent life insurance, which covers you for life as long as you continue to pay premiums. Permanent life insurance often includes additional benefits, such as a cash value component, but it tends to be more expensive than term life insurance. When choosing a new policy, be aware that premiums are likely to be higher than when you originally purchased a policy, as age is a factor in determining insurance costs.

Determining Coverage Amount

Once you have decided on the type of policy, you will need to determine how much coverage you need. Consider what you want the death benefit payout to cover and how your beneficiary would use it. For example, do you want to replace your income for your spouse, leave an inheritance for your children, or just provide for burial expenses? Make sure to take your budget into account when deciding on the death benefit amount, as higher benefits typically mean higher premiums.

Adjusting Your Current Policy

Before making any final decisions, it is worth talking to your current insurer to see if your policy can be adjusted to meet your new needs. Depending on the type of changes you want to make, you may be able to avoid a health questionnaire or medical exam, which is less likely if you switch to a new insurance company.

Applying for a New Policy

If you are unable to make the desired changes to your existing policy, you will need to apply for a new one. Many life insurance companies allow you to start a quote online, but you may need to work with an agent to complete the process. Keep in mind that switching to a new provider will likely result in a new medical exam and higher upfront fees. Additionally, be sure to purchase your new policy and ensure it is active before cancelling your old policy to avoid a gap in coverage.

Understanding Clauses and Exclusions

When switching policies, it is important to understand any clauses or exclusions that might reset, such as the contestability period and suicide clause. The contestability period, typically lasting two years, allows the insurer to deny a claim if the insured dies within this period and undisclosed health conditions or discrepancies are found in the application. The suicide clause, also typically lasting two years, states that the insurer will not pay out to beneficiaries if the insured's death is due to self-inflicted injury within this period.

Things to Keep in Mind

When switching life insurance policies, there are a few key things to keep in mind:

• Surrender charges: If you are cancelling a permanent life insurance policy, you may be charged a fee, so it is worth finding out the amount before cancelling.
• Tax consequences: Consult a financial expert or tax accountant to understand the potential tax implications of dropping your old policy and purchasing a new one.
• Increased premiums: Premiums on your new policy may be higher, or your health or age may result in different insurance conditions.
• Compare benefits: Carefully compare the benefits of new policies to ensure you are not losing any essential coverage.
• Consider changing the existing policy: You may be able to save time and money by amending or adding to your current policy instead of replacing it. Your current insurer may be willing to make adjustments, such as switching from term to permanent coverage, to retain you as a customer.
• Waiting period: Most new policies have a waiting period before certain death benefits become effective, so consider this before replacing your old policy.
• Understand financial consequences: When cancelling an existing policy, be aware of any financial consequences, such as losing the money you have already paid into a permanent policy.
• Talk to your current provider: Your current insurance company may be able to draft a new policy that meets your needs to retain you as a customer.
• Bundling discounts: If you switch insurance providers, you may lose any bundling discounts you currently have, which could increase the cost of other insurance policies you have.

Physician-assisted suicide

In the United States, physician-assisted suicide is currently legal in ten states and the District of Columbia. These states include California, Colorado, Hawaii, Maine, New Jersey, New Mexico, Oregon, Vermont, Washington, and Montana (by court decision). The specific laws and regulations vary by state, but they generally require individuals to have a terminal illness with a prognosis of six months or less to live.

The process typically involves a prescription from a licensed physician approved by the state in which the patient resides. Many proponents prefer the term "physician-assisted death" (PAD) to avoid the negative connotations associated with the word "suicide."

The topic of life insurance and its coverage in the event of suicide is a complex one. Most life insurance policies include a "suicide clause," which prevents the insurer from paying out a claim if the insured's death results from self-inflicted injury within a specified period, typically two years, from the policy's start date. This clause aims to prevent individuals from purchasing life insurance with the intention of committing suicide soon after. However, once this exclusion period ends, life insurance policies generally cover suicide, and beneficiaries are entitled to receive the full death benefit.

Group life insurance policies, often provided as an employee benefit, and military life insurance policies typically do not include a suicide clause, so they may pay out in the event of suicidal death. However, supplemental life insurance purchased through an employer usually contains a standard suicide clause.

Frequently asked questions