Does Life Insurance Cover Suicide?

While securing the future of their family members and dependents, most people seek to purchase a term insurance plan. With moderate premium rates, term insurance plans provide sufficient financial security to the family of life assured, in case of their untimely death. A sum assured on death also known as a death benefit is paid to the nominee by the insurance company either as a lump sum payment or as per the settlement options provided by the terms of the policy. 

Some insurance companies are still contentious about providing insurance cover for death caused by suicide and in this article, we are going to look at some of the instances where suicide might be included in an insurance policy. 

Suicide in Life Insurance - Included or Excluded?

There are certain limitations or circumstances in which an insurance company is not mandated to pay a death benefit to the nominee. These are known as exclusions and they generally include death caused by the substance abuse of alcohol and psychotropic drugs, any congenital disorder, exposure to HIV/AIDS, accidental demise, homicide or death caused by suicide and a natural disaster.

In recent years, some of these exclusions have come to be reversed where term insurance policies are designed to specifically cover death caused by accident or an environmental calamity.

Factors For Coverage of Suicide in Insurance

The following is a list of instances where suicide coverage is provided by life insurance companies:

1. If Suicide is Committed Within the Initial 12 Months of Policy Tenure

This is the primary instance where insurance coverage is offered to the nominee if the policyholder or the life assured dies by suicide or self-harm within the first 12 months of the policy tenure.

During this time, the nominee is eligible to receive 80% of the premiums paid till the date of death of the life assured if the policy is non-linked.

In case the policy is linked and the policyholder commits suicide within 12 months from the date of commencement of the policy, the nominee is eligible to receive 100% of the total premium paid as a death benefit. 

2. If Suicide is Committed Within 12 Months of Policy Revival

In certain life insurance policies, the insurance company offers a death benefit if the policyholder dies by suicide within 12 months of policy revival.

During such an occasion, the nominee can receive a death benefit, which is higher than 80% of the premiums paid till the date of death of the policyholder or the surrender value.

However, this will not be applicable for a policy that has lapsed without acquiring a paid-up value and no claim or benefit will be payable to the nominee. 

When Suicide is Excluded from Insurance?

These are the two instances where life insurance covers suicide. But, you must also be aware that suicide is one of the foremost exclusions under health and life insurance policies in India. Insurance companies might reject the death benefit claim of the nominee under any of the following circumstances:

1. In case the policyholder commits suicide after the initial period of 1 year, no death benefit will be payable to the nominee and the policy will be terminated. 
2. No death benefit will be payable to the nominee if a policy has lapsed and the policyholder commits suicide without acquiring the paid-up value. 
3. Any misinformation or undisclosed fact that has not been stated by the policyholder at the time of policy enrollment can lead to the rejection of the claim by the insurance company. 
4. If the policyholder was part of a group life insurance cover, then no claim can be made by the nominee for death caused by suicide from the policyholder’s employer. 

Conclusion

In conclusion, it may be said that committing suicide is a solemn and grim aspect of people’s lives. The decision of paying claims lies ultimately in the hands of the insurance company and one step can lead to a total disaster in the lives of others. Therefore, you must read all the terms and conditions associated with life insurance policies and as the old saying goes: look before you leap. 

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