Does life insurance cover suicide?

Life insurance normally pays out in cases of suicide, unless it happens during a particular exclusionary window laid out in the policy.

Life insurance provides a financial safety net that can last for decades. One concern that some insurance shoppers have is that an insurance company won’t pay the death benefit if the policyholder dies. This is typically unfounded, as life insurance policies almost always pay out; there are even protections in place if a carrier goes bankrupt.

But are there scenarios where life insurance won’t pay out? For example, does life insurance cover suicide? Depending on the terms of the policy’s suicide clause, suicide may not be covered, but this clause is usually only in effect during the first few years of the policy.

What is a life insurance suicide clause?

The life insurance suicide clause is a provision that’s usually in place during the first two years of the policy. Normally, when the policyholder dies, the death benefit is paid to the beneficiaries as a tax-free, lump-sum amount (or, sometimes, a series of payments) and that’s the end of the transaction. However, if the death is a result of self-inflicted injury, the insurer can refuse to pay.

The reason for this is to prevent an applicant from getting a policy and taking their own life immediately afterwards in order for their loved ones to receive the death benefit.

This presents some complicated scenarios. Is a drug overdose covered by life insurance? It may be, if it is deemed to be accidental rather than deliberate. It’s the burden of the insurer to prove a death was a suicide.

Note that after the first two years, the policy will usually pay for suicidal death (unless there is another provision or exclusion specifically outlined in the policy that forbids it).

Life insurance and depression.

During the underwriting process, a life insurance company will look at an applicant’s health and health history to learn how risky he or she will be to insure — how likely the applicant is to die during the course of being covered. This includes not only physical health but mental health as well.

Depression in particular is linked to suicide, and it’s important to disclose during the application. Answering basic questions, like when you were first diagnosed and the severity of your depression, along with being able to show evidence of treatment through medication and/or therapy, will keep you eligible for competitive rates.

The relationship between mental health and life insurance can be complicated. You should always disclose your mental health history, or else the death benefit can be denied during the contestability period. Each application and health scenario will be looked at on a case-by-case basis.

When can life insurance companies not pay out?

In addition to cases of suicide, life insurance companies may not pay out during the contestability period.

The contestability period is the two-year period when a policy first goes into effect; during this time, a life insurance company can contest the death benefit payout. Carriers can investigate a death and decide if the beneficiary has a legitimate claim, in order to prevent fraud. The contestability period discourages people from lying on their application and helps keep life insurance companies in business and providing coverage.

During the underwriting process, a life insurance applicant will be asked a series of health-related questions that will help the company set the premiums. Unhealthy people, or people with a history of health issues, are typically charged higher rates than healthier people. And even though carriers will gather more health information during the medical exam, applicants can lie about some aspects of their health history.

For example, an applicant lies and says they don’t have a history of smoking in order to avoid a costly “smoker” classification, but dies a year into their policy the insurance company can investigate and decline to pay the death benefit because of a material misrepresentation in the application.

There are a few important things to note. First, a company can’t choose to simply not pay out during the contestability period; they must have cause and evidence of a material misrepresentation. They find this through autopsies and other investigative measures.

Second, the contestability period only lasts for the first two years the policy is in force, but it can be reset if the policy lapses and the policyholder has to have it reinstated.

Finally, the suicide clause and the contestability period are not the same thing. Though the periods of time almost always overlap, and even the circumstances may overlap (for example, if suicide is a result of an undisclosed pre-existing medical condition), the suicide clause specifically deals with self-harm while the contestability period is concerned with fraud.