Life Insurance Payouts After Suicide: What's The Verdict?

Life insurance is a sensitive topic, and it's important to understand how it works in the unfortunate event of suicide. While it's challenging to think about, it's crucial to know how your life insurance policy handles such situations to ensure your loved ones are protected. So, do you still get life insurance if you kill yourself? The answer depends on several factors, including the type of policy and the specific terms within it.

Suicide clauses

The suicide clause typically includes an exclusion period, which is usually the first two years of the policy, during which the insurance company will not pay out the death benefit if the policyholder dies by suicide. This exclusion period can vary, with some states, such as Colorado, Missouri, and North Dakota, having a shorter duration of one year. After the exclusion period ends, the policy's beneficiaries can receive the full death benefit if the covered person dies by suicide.

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 exclusion period. Therefore, it is essential to carefully review the terms and conditions of the life insurance policy to understand the specific suicide clause and its implications.

Group life insurance policies, often provided by employers, generally do not include a suicide clause. This means that if a covered person dies by suicide, their beneficiaries will typically receive the death benefit. Military life insurance policies also tend to pay out the death benefit regardless of the cause of death, including suicide.

In cases where a claim is denied due to suicide during the exclusion period, the beneficiary is usually entitled to a return of the premiums paid, minus any outstanding payments or loan amounts.

Suicide exclusions

The duration of the suicide exclusion period can vary depending on the insurer and state regulations. While most states enforce a standard two-year period, some states, like Missouri, Colorado, and North Dakota, have shorter one-year exclusion periods. After the suicide exclusion period ends, the life insurance policy generally covers suicide, and beneficiaries are entitled to receive the full death benefit.

It is important to note that changing or switching life insurance policies can restart the suicide exclusion period, even if the new policy is purchased from the same company. Additionally, adding coverage or converting a term policy into a whole life policy can also reset the exclusion period.

During the suicide exclusion period, if a policyholder dies by suicide, the insurer may still refund the premiums paid up to that point, minus any outstanding premiums or loan amounts. This ensures that the beneficiaries receive some financial support, even if the full death benefit is not paid out.

Supplemental life insurance purchased through an employer usually includes a standard suicide clause and contestability period. In contrast, group life insurance policies, often provided as part of employee benefits, and military life insurance policies typically do not include a suicide clause, and thus, they may pay out the death benefit regardless of the cause of death.

Group life insurance

After the exclusion period, group life insurance generally covers suicide. If the policy does not include a suicide exclusion clause, the insurance company is required to pay the full death benefit if the insured dies by suicide.

It's important to note that group life insurance through an employer or organization may treat suicide differently. Generally, these life insurance policies don't include a suicide clause, so the policy can pay out for suicidal death. However, each plan can differ, and 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.

Contestability periods

The contestability period is a clause included in all life insurance policies that allows the insurer to review your application for incorrect information. This period usually lasts for two years after the policy begins, though it can be as short as one year in some states. During this time, the insurance company can be exempt from paying out the death benefit if it finds intentional misrepresentations in your application. For example, if you concealed a depression diagnosis, the company could deny or reduce the amount your beneficiary receives.

The contestability period allows your life insurance company to review your application for intentional errors after a death claim. It helps protect the life insurance company from fraud — it's very unlikely that someone will die during the first two years of a life insurance policy. It helps the insurer to confirm that you didn't withhold or lie about any health or lifestyle-related information during the application process.

The misrepresentations don't have to be related to your cause of death. For example, if you die in a car accident but failed to disclose a history of alcohol abuse, the life insurance company can deny your death claim.

The best way to ensure that your beneficiaries are taken care of in the event of your death is to be honest and forthcoming on your life insurance application. That way, the insurer won’t have any concerns during the contestability period.

If you get a new policy or reinstate your policy after a lapse, the period of contestability restarts. Unless your policy includes an incontestability clause, you can still be punished for false information after two years.

The incontestability clause is a key provision that activates after a life insurance policy has been in force for a specific period, typically two years. Once this period ends, the insurer generally cannot deny a claim based on errors or omissions in the application, except in certain cases of fraud. This means that after the initial contestability period, the insurer no longer has the right to investigate for misrepresentation during the application process and must pay out the death benefit proceeds.

Denied claims

If your life insurance claim is denied, it's important to understand the insurer's reasoning and know that you have the right to question and appeal their decision. Here are the steps you can take:

• Wait for the insurance company's decision: After the insured party's death, the insurance company must determine the cause of death. If they decide that you aren't entitled to a payout, they will send a denial letter.
• Review the insurance policy and application: Check for any misrepresentations made by the insured. For example, insurance companies will not pay out if a smoker claimed to be a non-smoker to get cheaper premiums.
• Check your state's protections for beneficiaries: Review your state laws to see if the denial meets state rules and if there are any protections for beneficiaries against insurance companies.
• Contact the insurance company with your appeal: Ensure you have all relevant information to support your claim and prevent delays, including the insurance application, policy, proof of premium payments, death certificate, and any other supporting documents.

It's important to note that changing a life insurance policy, such as switching to a new provider or adding coverage, can restart the suicide exclusion period. This means that if the insured person dies by suicide within the new exclusion period, the claim will likely be denied.

In addition, insurance companies may request additional documentation if they suspect suicide as the cause of death. This could include an autopsy report, medical examiner's report, EMS report, or the person's medical records. As a result, there may be a delay in the payout of benefits to the beneficiaries.

Frequently asked questions