Does Life Insurance Cover Suicidal Death? (The 2-Year Rule)

This is one of the hardest questions that a family can encounter. Asking does life insurance cover suicidal death is from a place deep worry and uncertainty over finances. The short answer for this question is: Nearly! (in most cases, that is), but not without a certain waiting period. This period is a feature that appears in almost every individual life insurance policy.

Life insurance is there to give a financial safety net. It aids loved ones to cope after passing of a policy holder. However, insurers also need to keep themselves safe from fraud. This is why there are some rules about deaths by suicide. These rules are not intended to be punitive in nature. They form an integral part of the insurance contract.

This comprehensive guide will tell you everything that you must know. We will get into the critical two year rule. We are going to cover some of the distinctions between individual and group policies. The claims process will also be shown to you. Our hope is to give clear, factual and compassionate answers about life insurance coverage for suicidal death in the process.

Why Do Life Insurance Suicide Coverage Rules Exist?

Before we get into the details around that, it’s worth some time to know about the perspective of the insurer. Life insurance is grounded on the appraisal of risk. An insurer determines the premiums based on the life expectancy of a person. They take into consideration factors such as age, health and lifestyle.

The fundamental idea behind this is to stop someone from purchasing a huge policy with the immediate intent of killing themselves to leave a tax-free expense with someone. This would create a situation of “adverse selection.” It would ruin the whole system of life insurance financially.

To monitor this risk with its responsibility to pay valid claims, insurance companies developed two important clauses that are interrelated as follows:

• The Contestability Period
• The Suicide Clause

These two clauses are the basis for how insurers approach this touching issue, and are central to how to understand the rules for a life insurance payout for suicide.

The Suicide Clause & Contestability Period Explained

When you have heard of the “2-Year Rule”, it is usually referring to two different but related clauses in a life insurance contract. Understanding them is important to understanding whether a policy will pay a suicide death benefit.

The Contestability Period’s Role in a Suicide Claim

The contestability period is a time period, usually the first one or two years following issuance of a life insurance policy. During this window of time, the insurance company has the right to investigate—or “contest”—any claim. This includes going over the original application and checking for errors or falsehoods.

• Purpose: To defend from application fraud.
• Duration: Usually last for 24 months from the date the policy was in force. (Some states may require a 1 year time period).
• What it covers: Any persuasion of death.

If the insured dies, for one reason or another, during this time, a thorough investigation will be carried out by the insurer. They will closely scrutinize medical history, lifestyle decisions and other information you provide on the application. If they find any material misrepresentation (a lie or omission that would have led them to refuse the policy or charge a higher premium) they may refuse to grant them a claim. For instance, if a person was denied as having a history of heart disease and in the first year died of a heart attack, the claim may be denied.

The Suicide Clause: The Core of Life Insurance Suicide Rules

The suicide clause is one specific provision only which seems to deal with death by suicide. This is contemporaneously with the period of contestability.

• Purpose: To avoid somebody purchasing policy with the intent of suicide.
• Duration: Almost all the time 24 months from the effective date of the policy.
• What it does: This controls the payout in the event that the insured dies by suicide during this two year window.

The way it operates in practice follows:

• Death by Suicide WITHIN the First 2 Years: If the insured dies by suicide during the suicide clause period, the insurance company will not pay the full death benefit. Instead, they will distribute the total premiums that the beneficiary put in, sometimes with interest. The policy is basically voided and the money paid into the policy is refunded.
• Death by Suicide AFTER the First 2 Years: If the insured was to die of suicide after the suicide clause and contestability period have ended, the insurance company would be required to pay the full death benefit to the beneficiaries, as would be done for most any other cause of death.

As the National Association of Insurance Commissioners (NAIC) points out, these clauses are standard. They are designed to “protect the insurance company against adverse selection by individuals who purchase a policy with the intention of committing suicide.”

This two year rule is the most important consideration in determining the outcome of a life insurance and suicide claim. It creates a clear boundary.

When Does Life Insurance Cover Suicidal Death? A Deeper Analysis

Now that we got 2 year rule, let us see the nuances. The question does life insurance cover suicidal death has a couple of more layers.

Investigating a Suicide Claim: What Happens in the First 2 Years

If a death occurs within the first two years, beneficiaries are likely to be treated to a very detailed investigation. This is not an accusation of wrong-doing, it is standard procedure. The aim of the insurer is to find out two things:

1. Cause of Death: Was it suicide? The insurance company will require the official death certificate. They may also request reports from the police, autopsies and medical examiners.
2. Application Accuracy: Was there any material misrepresentation on the original application? They will pull the application and compare it to the records of the deceased’s medical history. They will search for undisclosed medical conditions, specifically mental health diagnosis, treatments, or hospitalizations.

The burden of proof is the responsibility of the insurance company. They have to prove that the death was a suicide, or that there was a fraudulent information in the application.

How Material Misrepresentation Affects a Suicide Death Benefit

This is a crucial concept. It’s not about a little thing such as remembering a date incorrectly. It’s about an omission or falsehood so important that it would have affected the decision of the insurer interested in the issue.

Examples include:

• Denying a known diagnosis of severe depression, or bipolar disorder.
• Not telling you if he/she has attempted suicide in the past.
• Lying about substance abuse treatment.
• Not mentioning a high risk hobby that was specifically asked about.

If material misrepresentation is found, the insurer is able to deny the claim and return the premiums, even if the death is not suicide. This is why it is paramount to be absolutely honest on a life insurance application. For those shopping for their policy, it’s worth understanding the difference between policy types, such as for those reviewing insurance proactive guides for a term life insurance vs. whole life insurance, to make sure that the one selected matches their revealed health aid profile.

State Variations for Life Insurance Suicide Coverage

While the two-year rule is the standard in the industry, insurance is regulated at the state level. A few states may have a few different rules:

• One-Year Rule: Some states such as Colorado and North Dakota require a one year suicide clause.
• Missouri Exception: Missouri has the unique approach where the insurance company must show that the insured contemplates suicide at the time that they bought the insurance policy. This is a very high bar to meet.

Due to these variations, it is always imperative that the specific policy documents are read. It is the contract you have signed that tells the story. Consulting reviews of major providers such as in this State Farm Life Insurance review, can often show how a company applies these clauses.

Group Life Insurance Exceptions for Suicide Coverage

This is a huge exception to the two year rule. The rules for suicide coverage may be different for policies obtained via an employer. Group life insurance exceptions are prevalent and have significance and importance:

Group life insurance is one type of insurance given by a company to its employees. Because the insurance company is insuring a large number of people who are very diverse, the risk is spread out. The insurer doesn’t care about an individual person purchasing a policy with ill intent.

Here’s how it typically works:

• Basic Group Coverage: The basic amount of life insurance provided by an employer (e.g. 1x or 2x your salary) is often a covered that has no suicide clause. This means if an employee dies by suicide, the death benefit is generally payable from day one.
• Supplemental or Voluntary Coverage: Many employers offer you the option of purchasing additional life insurance coverage, in addition to the basic coverage. This “supplemental” coverage is often treated like an individual policy. It will generally come with its own two year suicide clause and contestability period.

This distinction is very important. A family may be entitled to a payout from the basic group policy, but under the supplemental policy they would only receive a return of premiums if the death occurs within two years.

Comparing Suicide Coverage: Individual vs. Group Policies

To ensure that it is clear, here is a table which compares the rules:

This is why understanding all aspects of an employer’s benefits putting it in a larger affordable business insurance strategy is so beneficial for employers and their employees.

The Life Insurance Suicide Claim Process: A Step-by-Step Guide for Beneficiaries

Filing a life insurance claim following a suicide is an extremely stressful and emotionally exhausting process. Knowing the steps can help reduce some of the uncertainty of any beneficiary.

Step 1: Initial Contact

The first step that any beneficiary should make is to contact the insurance company or the insurance agent who sold the policy. You do not have to have all the documents ready for this first call. Just give them the news of the passing of the policyholder.

Step 2: Gathering Documents

The insurance company will mail you a packet of claims. You will have to fill out the forms while providing a number of basic documents, of which most important:

• A certified copy of the death certificate. This is the single most important document. The “cause of death” listed will be an important factor in the claim.
• The original policy document (if available).
• A filled out claim form (provided by the insurer).

Step 3: The Investigation (If Within 2 Years)

If, however, the death was during the contestability period, the insurer will start its investigation. The claims department will:

• Ask for a signed authorization from the beneficiary to access the deceased medical records.
• Review the death certificate, the police reports and toxicology reports.
• Compare the information from the investigation and the original insurance application.

This process can take months, and even longer. It is important for beneficiaries to be patient and cooperative.

Step 4: Claim Decision

Once the process of investigation is complete, the insurer will make a decision:

• Claim Approved: If the death took place after the two year period, or if it was a covered group policy, the claim will be approved and paid out usually within a few weeks.
• Claim Approved (Return of Premiums): If the death has been due to suicide within the two-year period the insurer will approve a return of premiums equal to the premiums paid.
• Claim Denied: If the insurer discovers prima facie evidence of a material misrepresentation of material information on the application (within the contestability period) he or she may deny the claim altogether and give back the premiums.

When a beneficiary receives the payout it has various options. Generally the funds are not taxable. They can be used for the funeral costs, paying off debts or replacing income. The fundamental reason behind the benefit is to be financially stable.

Quote from a typical policy document: “If the Insured dies as per sue d by suicide as sane or insane within last 2 years from the Policy Date our liability will be limited as much as the total amount of premiums paid where no interest will be paid.”

This language is normal and it strengthens the two year rule.

What to Do if Your Life Insurance Suicide Claim is Denied

Getting a letter of denial is devastating. However, it is not always the end of the road. Beneficiaries have rights and options.

1. Review the Denial Letter: The insurance company must provide a written explanation of the denial for the law. This letter will contain references to the specific provisions of the policies as well as the evidence they used to reach their decision.
2. Request the Full Claim File: You have a right to request the complete file attached to your claim. This will include all the documents, reports, and notes taken internally by the insurer.
3. File an Appeal: All insurance companies have an internal appeals process. You can file a formal appeal; coming up with new information or arguments against their decision.
4. Contact the State Department of Insurance: Each state has some regulating body that monitors insurance companies. You can put in a complaint and they would investigate if the insurance acted in ill-will or whether the laws of a particular state were violated.
5. Seek Legal Counsel: If you suspect that the denial was unduly made then it may be time to call an attorney who specializes in the field of insurance law. They can evaluate your case and interact with you in negotiations or, if needed, in suing the insurance company. Looking into avenues like professional liability insurance, with regards to any legal factor, brings more into the light of complexities that might arise in such matters.

Honesty and Mental Health: Securing Your Suicide Death Coverage

This whole discussion points to one general theme, which is that honesty is non-negotiable. When applying for life insurance, tell everything.

• Do you suffer from a history of depression or anxiety? Disclose it.
• Are you using prescription medication to treat a mental health illness? Disclose it.
• Have you undergone counseling or therapy? Disclose it.

Many people are afraid of telling someone they have a mental health condition because they think they will be automatically denied. This is not true. Insurance companies are becoming more sophisticated in the underwriting of mental health issues. Being honest in providing answers is the best thing to do. For more information as well as help about mental health, organization such as National Alliance on Mental Illness (NAMI) are invaluable resources.

While, if the disclosure results in the insurer offering a higher premium or a “rating”, it is much better than a future claim being denied because of misrepresentation. This proactive planning also involves revising your coverage on a regular basis. Life Changes—marriage, new child, different job—may require you to change your policy. Just like one would want to review his or her United Healthcare insurance or Humana dental insurance plans every year, life insurance should also receive the same amount of attention.

Short Frequently Asked Questions (FAQ)

Conclusion: Understanding if Life Insurance Covers Suicidal Death

The question of whether does life insurance cover suicidal death is very sensitive, and comes down to the fine print of the insurance contract. With individual policies, “The 2-Year Rule” is the ultimate guide. Or, if the policy has been in effect for more than two years, the death benefit is usually paid in full. If the death takes place within these first two years, the beneficiaries will obtain a refund of premiums paid.

Group life insurance through an employer is often a major exception to this, I have often heard suicidal death from the outset of a basic plan. Understanding the difference between basic and supplemental coverage is extremely important to families. Ultimately, these rules such as the suicide clause and contestability period are implemented to help keep the life insurance system financially intact while still handling for families after a waiting period.

In the end, whether or not does life insurance cover suicidal death almost entirely depend on this time and the type of policy in place. The greatest tools any policyholder can have are being totally honest when completing his or her application and understanding his or her contract very well. Knowing these rules brings some clarity in the middle of an impossibly difficult time, so understanding does life insurance cover suicidal death is so vital.