Life Insurance And Suicide: What Families Need To Know

If you're wondering whether your family will receive life insurance benefits in the event of your suicide, it's important to understand the intricacies involved. While it's a delicate topic, knowing how your life insurance policy handles such situations is crucial for ensuring your loved ones are protected. Most life insurance policies include a suicide clause, which means that if you take your own life within a certain period, typically the first two years after purchasing the policy, the insurance company may deny the death benefit or only refund the premiums paid. However, once this exclusion period ends, life insurance policies generally cover suicide, and your beneficiaries will receive the full death benefit.

Military life insurance policies

SGLI policies are available to active-duty members of the Army, Navy, Air Force, Space Force, Marines, or Coast Guard; commissioned members of the National Oceanic and Atmospheric Administration (NOAA) or the US Public Health Service (USPHS); members, cadets, or midshipmen of the US military academies, Reserve Officers Training Corps (ROTC), Ready Reserve, or National Guard; and volunteers in the Individual Ready Reserve (IRR) mobilization category.

When a service member leaves the military, they can convert their SGLI policy into a Veterans' Group Life Insurance (VGLI) policy, which offers similar benefits. VGLI is a group life insurance policy available to veterans from the VA. After leaving the military, individuals have up to one year and 120 days to apply for a VGLI policy, which provides coverage up to the amount they had under SGLI. Part-time SGLI policyholders who suffered a disability may also be eligible for VGLI coverage if they are disqualified from standard premium insurance rates.

In addition to SGLI and VGLI, there are other life insurance options available to military members and their families, such as Family Servicemembers' Group Life Insurance (FSGLI) and Service-Disabled Veterans' Insurance (S-DVI). FSGLI provides term life insurance benefits of up to $100,000 for a member's spouse and $10,000 for dependent children, while S-DVI is designed for veterans with a service-connected disability.

Suicide clauses

The purpose of the suicide clause is to protect the insurance company from financial risk. After the 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 to a whole life policy, can reset the exclusion period.

Group life insurance policies, often provided by employers, usually include similar suicide clauses to individual life insurance policies. If the suicide occurs within the exclusion period, the death benefit may not be paid. However, military life insurance policies, such as those offered by Veterans' Group Life Insurance (VGLI) and Servicemembers' Group Life Insurance (SGLI), typically pay out the death benefit regardless of the cause of death, including suicide.

In summary, suicide clauses are a critical aspect of life insurance policies, directly impacting whether beneficiaries receive financial support. Understanding these clauses and their implications is essential for both policyholders and their loved ones.

Denial of benefit claims

Beneficiaries may be denied a payout from a life insurance policy if the insured party's death is the result of an uninsurable event. However, there are steps that can be taken to challenge the insurer's decision. Here are some important things to know and consider if your life insurance claim is denied:

• 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 are not entitled to a payout, they will send a denial letter.
• Review the insurance policy and application: Check for any misrepresentations or discrepancies in the information provided by the insured. For example, insurance companies will not pay out if a smoker claimed to be a non-smoker to obtain cheaper insurance premiums.
• Check state laws: Review your state's laws to see if there are any protections for beneficiaries against insurance companies to determine if the denial meets state rules.
• Contact the insurance company with your appeal: Gather any relevant information, such as the insurance application, policy, proof of premium payments, death certificate, and any other supporting documents needed to strengthen your claim.
• Consult an attorney: If necessary, consider consulting an experienced attorney or insurance professional to help you navigate the appeals process and increase your chances of securing the benefits owed to you.

It is important to note that denial of benefit claims can occur if the death falls within the policy's suicide exclusion period, which is typically one to two years from the start of the policy. Changing a policy or switching insurance providers can also restart the suicide exclusion period. Additionally, nondisclosure of relevant information at the time of purchasing the policy, such as risky behaviours or mental health issues, can also lead to denial of claims.

Group life insurance

The typical group life insurance policy is for term life insurance, which is renewable each year. This is in contrast to whole life insurance, which provides permanent coverage and has higher premiums and death benefits. Whole life insurance is the most popular type of life insurance.

The amount of coverage provided by group life insurance varies. A basic employee group life insurance package may provide $10,000–$50,000 worth of coverage, or it may be calculated based on an employee's earnings, often providing coverage worth one or two times their annual salary.

Contestability period

The contestability period in life insurance refers to the time after a policy is approved when an insurer can investigate claims and deny coverage if they find any false or incomplete information. This period typically lasts for two years from the date of policy approval, and it exists to deter fraud and spot any misrepresentation, thereby helping to control insurance costs. During this time, insurers can investigate various factors, such as the accuracy of the information provided on the application, the policyholder's medical history, and any potential misrepresentations or omissions that may affect the policy's validity.

If an insurer finds misrepresentation or non-disclosure of material information during the contestability period, they may adjust the policy's terms and conditions or deny the claim entirely, depending on the severity and impact of the misrepresentation. For example, if an insured individual stated they were a non-smoker but died of lung cancer a year after buying the policy, the insurer might reduce the claim. This is considered a material misrepresentation and can significantly affect the death benefit paid out to beneficiaries.

The contestability period is distinct from the suicide clause, which states that if the insured individual dies by suicide within a certain period (usually two years) of signing up for the policy, the beneficiaries will not receive any benefits. If a suicide occurs outside of this timeframe, it is typically treated like any other cause of death.

Frequently asked questions