It’s a long-held belief that life insurance doesn’t pay out if the policy holder kills themselves.
But that’s a misunderstood belief and partially a myth.
This is a complex topic, but if you’re curious how the two concepts of life insurance and suicide intermingle, here’s what you need to know.
Will Life Insurance Companies Cover Suicidal Death?
Most life insurance policies will pay out if the policyholder commits suicide. But it is complex territory, suicide and insurance, which is a good thing.
If it were easy to receive a payout, it might encourage desperate people to do desperate things.
Payouts aren’t always easy to come by. Anyone who thinks they are or if anyone reading this is thinking of ending their life, I hope you’ll call the National Suicide Prevention Lifeline at 1-800-273-8255.
You may have money problems and thus think your family would be better off with your life insurance money than having you around, but you’re wrong.
Let’s discuss the circumstances that could result in both denial and approval of a life insurance policy payout.
When Do Life Insurance Companies Deny a Claim Due to Suicide?
There are two main criteria to consider:
- If the life insurance policyholder has only had their policy for a year or two, depending on both the insurance company and the state
- If it can be proven that the person committed suicide
This is for an obvious and good reason. The last thing an insurance company, or any human being wants, is for a despondent person to take out a life insurance policy on a Wednesday and end their life on a Thursday.
Example of a Claim Being Denied
And life insurance companies are very serious about making sure a policyholder hasn’t committed suicide. When actor Heath Ledger died, the ReliaStar Life Insurance Company had written the $10 million life insurance policy that was meant to protect his then two-year-old daughter, Matilda, from financial hardships. He had only taken out the policy six months earlier, however, and the insurance companies deemed the actor’s death “suspicious,” claiming that it might have been a suicide. The New York City Medical Examiner, however, thought otherwise, ruling the death an accident.
Ledger had taken prescription pills — a lot of them — but nobody — that is friends and family interviewed — believed he intentionally wanted to kill himself. It certainly seemed improbable to the general public, since he was heading into a career-high, having just wrapped up the role of the Joker for the Batman film, The Dark Knight.
In any case, the insurance company and the lawyers working for Ledger’s estate eventually settled out of court and both sides, according to news reports, were pleased with the outcome.
But the settlement underscores that if a life insurance company believes you may have committed suicide within a year or two of buying a policy, they will do everything they can to keep your beneficiaries from collecting.
And if somebody does take out a life insurance policy and, say, eight months afterwards, they end their life? What happens? Generally, the only compensation the beneficiary will receive is that the premiums will be returned.
When Does Life Insurance Cover Suicide?
Usually, it’s after a policy has been in effect for two years. Sometimes it only takes a year; if someone has paid their premiums for a year and then decides to end things, it becomes easier to collect.
It has actually been that way for some time — and it has been debated as long.
In fact, back in 1839, John G. Millingen, a physician and author, wrote in the literary magazine Bentley’s Miscellany, “If a suicide is madness, a forfeiture of an insurance, the premium of which may have been paid regularly for a series of years, and at considerable inconvenience, is most unjust; although I can readily admit that if such an insurance was effected a short time before the act of suicide, the loss would be but fair.”
In 1898, in a trade publication called The Insurance Press, an article stated that “in the early history of life insurance, it was considered as a plain proposition that a death claim occasioned by suicide should not be paid.” The industry saw it in the same light as why you wouldn’t let a policyholder take out fire insurance — and then set a house on fire.
But even before the 20th century, it was accepted that somebody who took their own life had serious problems — and that their beneficiaries shouldn’t be denied. The Spectator Insurance Yearbook, another trade insurance publication, also in 1898, stated, “Suicide is not a valid defense against payment of loss unless it is shown that the deceased contemplated self-destruction when he took out the policy.”
Beware of the Fine Print Regarding Mental Illness and Drug Use
Which isn’t to say things will go perfectly for a grieving spouse or child if family members suddenly wonder about a policy and inquire to see if they are entitled to benefits after a loved one commits suicide. Odds are very good that you’ll be paid in full if it’s after two years, but how the policy is spelled out matters.
For instance, if the policyholder was diagnosed with mental illness before taking out the policy, there’s probably something in there about the policyholder’s coverage being denied if the holder committed suicide. There may be something in the fine print about addictions, especially if it was known that the policyholder had a drug problem. There could be a lot in the fine print that prevents a policy being paid out in case of a suicide.
Final Thoughts on Life Insurance and Suicidal Death
Of course, if you’re looking to buy life insurance and checking the fine print and worrying about what’s there and what’s not in case you would decide to someday do yourself in, that’s probably a good sign that you should talk to a professional.
Remember, life insurance is there in case the unthinkable happens. If you don’t use it, everyone wins.
Call us today for a quote from the best term life companies at 1-800-712-8519.