Life insurance policies are meant to cover the family financially in case the policy holder should pass away unexpectedly. However, what happens when the policy holder takes his or her own life? This is a question that many families have because when a loved one who was the bread winner of the family dies for whatever reason there is a powerful financial burden that is now placed on them.
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The missing income combined with the debts incurred by the mortgage, car and credit card payments as well as the funeral itself represents a terrible financial burden on the family that is only compounded by the idea that the insurance company will not pay due to the means of the death.
However, does life insurance pay for suicide? The answer may surprise you as there are standard clauses in many policies that address this very issue. Life insurance and suicide is something that all families should go over in their policies to see exactly how it is addressed.
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Does Life Insurance Cover Suicide?
The answer is yes depending on the clauses in the policy itself. In essence, suicide and life insurance are addressed in most standard policies where some many even offer a life insurance suicide payout. Essentially, there are two clauses in most policies that address life insurance after suicide, the suicide clause and the incontestability clause.
Understanding what each clause does and how it applies to the life insurance policy means that you can be better informed before such an event can take place. While suicide is often unpredictable, the effects are such that they need to be fully understood so that families can better cope in case the worst does happen.
Suicide Clause in Life Insurance:
The life insurance suicide clause generally states that there will be no death benefit paid if the policy holder commits suicide within the first two years of the policy. This is to prevent someone who has suicidal thoughts to protect his or her family by taking out life insurance. In fact, the suicide clause is designed to help prevent such an occurrence from happening.
If an insured person decides to take out a new policy, then the suicide clause goes back into effect for the first two years. Suicide and life insurance policy are elements that do go together if the unfortunate event occurs over two years after the insurance goes into effect.
The incontestability clause states that if the policy holder made false or misstatements on the policy application and dies within the first two years, the insurance company may decline to pay the death benefits. Like the life insurance suicide exclusion, this is also renewed if a person replaced their old life insurance policy with a new one.
Does Suicide Void Life Insurance?
Suicide can void the policy if it occurs less than two years after the life insurance went into effect. Apart from insurance companies denying the benefits if the cause of death was unclear, the only other major way that they can void the policy under these circumstances is if the policy holder made misstatements on the application form.
Generally speaking, the misstatements can really be anything that was not true at the time which the policy holder applied for the life insurance. It is par for the course that all life insurance companies will go over the application forms after the death of the policy holder to check and see if there were any misstatements or wrong information which could void the policy.
In the case of suicide, checking over the policy becomes even more important to the company if they believe the intention of the policy holder was to mislead or outright lie to get the life insurance and cover the beneficiaries. Insurance is a business like any other in that they want to ensure that the consumer or policy holder side of the contract was properly fulfilled before paying out the benefits.
Life Insurance Suicide Exclusion:
The suicide exclusion is one that does create concern for beneficiaries, however in most cases insurance companies will pay the death benefits if more than two years have passed after the policy took effect.
How to Get Life Insurance that Covers Suicide?
It is difficult to get life insurance that will cover suicide in the first two years of the policy. That clause is present to protect companies from individuals who only want to benefit their families financially if they should take their own life.
So, the answer is that all suicides are generally covered if the policy itself is more than two years old. Under most circumstances, the question of “Will life insurance pay for suicide?” is yes. However, there are exceptions to that rule which often will depend on the size of the death benefit.
When Insurers Don’t Want to Pay?
Apart from the two clauses, there are times in which suicide or the appearance of suicide may void the policy. Arguably the most famous recent case was that of actor Heath Ledger who died of what was described as an accidental abusing of sleeping medicines.
His $10 million life insurance policy was just seven months old and the insurance company responded by launching an extended investigation. Eventually, the life insurance company paid an undisclosed amount to settle the lawsuit brought by lawyers represented Ledger’s daughter who was the beneficiary.
There are actually many cases in which insurance companies either contest the death of an individual under unclear circumstances as a suicide to avoid paying a large benefit. So, while a clear case of suicide will void a life insurance policy if it happens during the first two years, insurance companies have shown a willingness to contest in court large life insurance benefits where the policy holder died under circumstances that were unclear.
Life insurance and suicide are two elements that do go together with the insurance company paying the death benefits if the event occurs over two years after the policy went into effect and there was no misinformation put into the application by the policy holder.