Suicide, one of the leading causes of death in America, according to the Center for Disease Control (CDC), can be one such situation, but only if the suicide occurs within two years of the policy's opening — also known as the contestability period — and the insurance agency can investigate the claim.
The life insurance suicide clause explained
Life insurance coverage is generally pretty straightforward. When someone who holds a life insurance policy dies, their beneficiaries receive a death benefit.
This tax-free payment is delivered either in a lump sum or through multiple payments.
But things get a little more tricky when the policyholder has taken their own life. If the policy has been in effect for less than two years, the insurer can invoke the suicide clause and refuse to pay.
After two years, insurers will generally pay out for suicides unless the policy contains other clauses that apply beyond the first few years.
In some situations, such as deaths caused by accidental drug overdoses, insurance companies will undertake investigations to determine whether they’ll provide coverage.
The contestability clause: Does suicide void life insurance payments?
While the contestability clause also applies to the first two years of a policy and there is some overlap with the suicide clause, the two are not interchangeable.
When you apply for life insurance coverage, you’ll go through an underwriting period, during which you’ll be asked a number of health- and lifestyle-related questions that will help your insurer determine your premium.
If you have a history of poor health, pose a number of risk factors or are simply older, you’ll likely pay higher premiums than a young, healthy person. You’ll also do a medical exam, which should reveal most preexisting conditions. Even with all the insurer’s due diligence during the underwriting period, however, life insurance applicants may still lie or omit certain relevant health factors.
And such lies and omissions are exactly what insurers look for when they investigate claims made during the two-year contestability period. The goal is to prevent fraud.
The insurer’s investigation will look for any sign that the policyholder lied on their application. For example, if a policyholder didn’t disclose that they were a smoker, and later died of lung cancer, that’s going to raise red flags for the insurance company.
Upon their investigation, if the insurance company finds that the cause of death was linked to smoking, they can deny the claim.
But in their investigations, insurers must show proof of fraud. Here, they have no discretion on whether to pay or not — they are legally required to pay unless they can present proof that the policyholder committed application fraud.
While the contestability clause lasts for just the first two years of a policy, it can be reset if the policy lapses at any point and has to be restarted.
The incontestability clause
Once that initial two-year period has ended, the incontestability clause invalidates the contestability clause.
Essentially, after two years, even if you fudged some information on your application or failed to disclose relevant details, your insurance company can’t use that as a reason not to pay out your life insurance benefits.
There are still some exceptions to this rule, but in general this clause protects policyholders from having their coverage canceled years into it because they made a mistake in the application or their medical circumstances have changed.
When dealing with group insurance
Whereas individual life insurance refers to a policy you seek out and buy on your own, group life insurance is provided through your membership of an organization, like your employer,
Generally group insurance polcies don’t have a suicide clause. This means that if you have insurance coverage paid through your work, your beneficiaries should receive a payout if you commit suicide even if it’s within the first two years.
Even when you may not get an insurance payout, experts recommend you reach out to the insurance company in the case of a family member’s death because you may be able to recoup some of the premiums paid over the excluded period.
Summary: life insurance and suicide
In short, yes, life insurance policies will pay benefits for suicide deaths. But if either the suicide or contestability applies, the payout isn’t guaranteed.
If you’re considering buying a life insurance policy, insurance will cover a wide set of issues, including suicide. And coverage can cost as little as $1 a day.
Are you currently looking for a life insurance policy? Quotacy can help you get free quotes and compare policies. You won’t even be asked to provide your contact information upfront.
We never know when tragedy or loss can happen, but life insurance allows us to ensure our loved ones get the financial support they need when we’re gone.
Resources and support if you’re considering suicide
Are you or someone you know in crisis? Help is always available through the National Suicide Prevention Lifeline at 1-800-273-TALK (8255).
You can even text the Crisis Text Line by texting HELLO to 741741.
There’s also a crisis hotline specifically for veterans. The Veterans Crisis Line helps connect veterans with caring, qualified responders through the Department of Veterans Affairs. Their number is 1-800-273-8255.