While there are no easy answers when a loved one dies by suicide, one question you may have is whether their life insurance policy is still valid. In some cases, yes, beneficiaries can still receive a life insurance payout if the policyholder dies by suicide. However, there are limitations. Bankrate breaks down how life insurance policies work in these instances to better help you navigate this difficult time.

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When does life insurance cover suicide?

Life insurance covers a policyholder’s suicidal death in many cases. However, some life insurance policies include contestability and suicide clauses which must expire before a suicidal death will be covered. Usually for a two- to three-year period, the exclusionary clauses place stipulations around death benefit payouts. Once these clauses expire, however, beneficiaries may receive the death benefit left to them by the policyholder.

What is a life insurance suicide clause?

A suicide clause is often in force for two or three years after a life insurance policy takes effect. During this timeframe, the clause stipulates for an allowance of investigation of the policyholder’s death.

Insurers that demonstrate that the policyholder committed suicide during this period, or if law enforcement or a medical examiner rules the policyholder’s death a suicide, the insurer may deny a beneficiary’s claim to the life insurance death benefit.

What is a life insurance incontestability clause?

The contestability clause accounts for the circumstances around a policyholder’s death and usually applies to the first two years of a policy. During this timeframe, the contract enables insurers to deny claims for a variety of reasons, including suicide or performing an illegal act.

The incontestability clause kicks in once the contestability clause expires. Once incontestability takes over, only serious infractions – such as fraud or misrepresentations – are considered grounds for denial of the claim. The types of infractions that may lead to a claim denial will vary from company to company.

Notably, the exclusionary period restarts when changes are made to the life insurance policy, even if the insurer does not change. For example, converting two term life insurance policies to a single policy with a larger payout value initiates the start of another exclusionary period of two to three years.

However, maintaining the same death benefit and converting from a term life insurance policy to a whole life insurance policy should not reset the exclusionary period.

As long as the contestability and suicide clauses have expired, and there is no evidence of misrepresentation or fraud, suicide should be covered and the death benefit paid to the beneficiary.

How does group life insurance treat suicide?

Group life insurance, the type of coverage provided as a workplace benefit, typically pays a death benefit on suicide claims without the two-year contestability restriction.

In cases of a private purchase of supplemental life insurance, typically offered through an employer, professional organization or other entity, a contestability clause likely applies. Contractually speaking, insurers investigate claims and possess a wide latitude for denial of a claim in the first two years of the policy’s effective date.

How do life insurance payouts work for suicide?

After the exclusionary period, if a policyholder dies by suicide, the policy pays a death benefit to the beneficiary just as it would for death from an illness or any other insurable cause.

A policyholder’s suicide during the exclusionary period provides no payout of the death benefit. Very often, however, life insurers pay out the amount of premiums paid on the policy minus any premiums owed before the policyholder’s death. Insurers also subtract loan amounts on any death benefit payout on permanent policies.

What do you do if your life insurance claim is denied?

Life insurers typically defer to law enforcement or to medical examiners to declare a policyholder’s cause of death. However, if an insurer suspects the insured died by suicide or another uninsurable cause, it has the right to contest or deny claims during the exclusionary period.

In these instances, insurers bear the burden of proof in demonstrating the policyholder died from suicide. The company can undertake its own investigation and consider relevant information:

  • Autopsy report
  • Death certificate
  • Drug or alcohol abuse
  • Evidence of illegal behavior
  • Family and friends or witness testimony
  • Health history and medications, including psychiatric records
  • Possible suicide note
  • Weapons purchases

Policy beneficiaries who disagree with an investigation’s finding of suicide during the contestability period, and who receive a claim denial for an insurable cause of death, can contest the decision, quite possibly with legal action. While murky scenarios like death from an overdose of a prescribed medication leave room for debate over insurable and uninsurable causes of death, contesting a denial opens the door to possibly receiving some level of payment.

Avoid application misrepresentations

Suppose you have a pre-existing medical condition that you think will affect your ability to purchase a life insurance policy. Instead of disclosing this information to your life insurance company, you keep it to yourself, and the doctor does not discover it during your pre-screening medical exam. Although unlikely, the company also does not find your condition when reviewing your past medical history to determine your insurability. As such, they issue your life insurance policy.

Later, you pass away during your policy contestability period. If your life insurance company finds this preexisting condition during their investigation, they can deny your claim. Your cause of death does not have to be from the hidden condition, but because it was not disclosed, it can still be grounds for denial due to fraud.

When applying for a life insurance policy, you must be honest and forthcoming about your medical history. Failure to do so runs a high risk of a denied claim in the future.

Consult state laws

Some states’ insurance regulations provide protections to beneficiaries. Check the applicable state laws around life insurance contestability and determine rules around exclusionary periods. States also impose varying restrictions around contesting contracts, which limits the window to overturn a denial. Additionally, some states restrict the application of new suicide clauses in converted policies.

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