What is a Suicide Clause?
A suicide clause is a part of many life insurance policies that says that if the insured commits suicide within a certain amount of time after the policy is purchased (usually, one to two years), the policy is nullified. As a result, the policy beneficiaries will not receive anything.
Life insurance and suicide
Without a suicide clause, people could be financially incentivized to die by suicide. Including this clause that specifically negates the policy benefits in the event of suicide protects life insurance companies from premature payouts and removes the potential enticement for the insured to commit suicide.
Understanding a suicide clause’s timeline
Most suicide clauses expire after a certain amount of time, like one or two years. Certain states have laws that limit how long this exclusion period can last.
If the insured commits suicide and the exclusion period has ended, their beneficiaries are entitled to the full death benefit.
Policy owners should note, however, that making changes to their policy can reset the timeline on a suicide clause’s exclusion period.
The Contestability Period
There is a contestability clause in every life insurance policy that permits the insurer to contest an application within a certain timeframe. The insurer can investigate if a beneficiary makes a claim during this time, to ensure that all conditions were met. This does not refer to suicide, but to other circumstances, like whether the person committed an illegal act or lied on their application.
Once the contestability period ends (usually two years), the incontestability clause takes over. After this period, the insurer no longer has the right to contest the payout, except in cases of misstated age or sex, and must pay out the death benefit.