According to the Centers for Disease Control and Prevention (CDC), suicide is the tenth leading cause of death in the United States. But is it covered by life insurance? Read on to find out.
Suicide and Life Insurance
The question of whether life insurance covers suicide is a broad one, and the answer depends on what type of life insurance policy you have. Most term and whole policies include a suicide clause or provision, which means that if the policyholder commits suicide within one to three years of purchasing the policy, the beneficiaries will not receive the death benefit. On the other hand, if the policyholder commits suicide after this period, the death benefit will be paid out.
The Suicide Clause
Insurers fear that if they offer blanket coverage for suicide, people may resort to it as a way to provide for their loved ones financially. That’s why most policies include a suicide clause or provision, which states that the death benefit will not be paid out if the policyholder commits suicide within a certain number of years after purchase. Once this period ends, life insurance does cover suicide and a death benefit will be paid out.
Different states have different exclusion periods, but they usually range between a year and three years.
If the policyholder commits suicide within the exclusion period, the beneficiaries will not receive the death benefit, but they will likely get a return of the monthly premiums.
It’s important to note that if the policyholder changes the policy at any time — i.e., adds coverage or consolidates policies — the clock gets reset back to zero and the exclusion period starts all over again.
The Contestability Period
Every life insurance policy comes with a contestability clause that allows the insurer to contest an application within a certain time period. If the beneficiaries make a claim during this period, the insurer can investigate to make sure that all of its conditions were met. This doesn’t refer to suicide, rather to other situations, like whether the person died performing an illegal act or lied about any material on their application.
The incontestability clause takes over once the contestability period is over (usually two years). During this period, the insurer no longer has the right to contest the payout, aside for misstated age or sex, and must pay out the death benefit.
Types of Life Insurance and Their Suicide Policies
Not all life insurance policies have the standard suicide provision. Group life insurance, often given by employers, does not usually include a suicide clause but just pays out the death benefit with no question asked.
Whole life insurance, which is more complicated than term since it contains a cash value component, will also not pay out the death benefit if the policyholder commits suicide within the exclusion period. These policies, can, however, pass over the plan’s cash value to the beneficiaries even if the policyholder commits suicide within the exclusion period.
Determining the Cause of Death
When beneficiaries submit a claim to an insurance company, the company will ask for a copy death certificate. The death certificate will state how that person died, i.e. by suicide, natural causes, accident, etc.
If the cause of death on the death certificate isn’t clear, the insurance company may ask for additional documentation like an autopsy report. This might cause a delay in the beneficiaries receiving their death benefit.
Still have questions? We have answers! Here are some of the most frequently asked questions regarding life insurance and suicide.
Does term life insurance cover suicide?
Yes, term life insurance does cover suicide, as long as the suicide occurred after the exclusion period determined by the insurer (usually one to three years after policy purchase).
Does whole life insurance cover suicide?
Like term, whole life insurance requires that the suicide provision has passed. In some cases, the cash value component isn’t included in the suicide clause and can be paid out before it’s over. However most whole life policies only start accumulating cash value after two years, thus this is likely a moot point. If the suicide occurs after the exclusion period specified by the suicide clause, the death benefit will be paid out.
What is the incontestability period?
The contestability period is a certain period of time (usually two years) during which the insurer has the right to contest a claim submitted by the beneficiaries of a policy. During this time, the insurer can contest or deny the claim based on several reasons:
- If it discovers that the policyholder lied on the application
- If the policyholder didn’t disclose a previous illness
- If the policyholder died while participating in an illegal or dangerous activity that should have been disclosed
- If the policyholder didn’t pay all the premiums
Once the contestability period is over, the insurer can no longer contest the claim and must pay the death benefit. When a beneficiary submits a claim for the death benefit for someone who has died by suicide, the suicide clause must be over before they receive the payout.
What’s the difference between term and whole life insurance?
Term life insurance, also known as “pure” life insurance, is a life insurance policy that you can buy for a specific amount of time, known as a term. As long as you pay the monthly premiums, you are covered during that term. Once the term is over, you can buy a new policy, renew, or convert your policy to a whole one.
Whole life insurance is life insurance that lasts your entire lifetime. It also has a cash value component that allows you to accumulate savings over time. The lifetime coverage plus cash value make whole life insurance significantly more expensive than term, which is why the latter is more popular. Still, there are pros and cons to each. The choice ultimately depends on your personal situation.
You can read more about the differences between term and whole life insurance here.
Can I qualify for life insurance if I have depression?
People with depression, anxiety, and other mental illnesses often wonder if they can qualify for life insurance. The answer is usually yes, but in some cases, your rates may be higher. The higher premiums have to do with the way life insurance is calculated.
Life insurance underwriters take every aspect of your health and lifestyle into account when deciding to accept them and how much they should pay in monthly premiums. This includes mental and physical health, driving records, credit history, job, and even hobbies. If your record isn’t stellar in any of these areas, you will likely receive higher rates.
The rates are based on statistics culled from millions of people and they reflect the statistical likelihood that a person will die early. The higher the risk, the higher the premiums. Conversely, the lower the risk, the lower the premiums
If you have depression that’s under control, there’s no reason you won’t qualify for life insurance. If you have depression and a previous suicide attempt, that might change the situation. It will ultimately depend on the insurer. If you need help shopping around for the best rates for someone with depression, the insurance advisors at Sproutt can help.
When applying for life insurance, it might be tempting not to mention your depression, anxiety, or other mental illness. This way, you can qualify for better rates. Don’t do this! When applying for life insurance, you must disclose all of your health history. Hiding health information can end up with the death benefit claim being rejected, and then your beneficiaries will end up with nothing. And that defeats the entire purpose of life insurance.