Life insurance plans are purchased to protect the family’s financial security in case of unforeseen death of the life assured. If the policyholder is the sole breadwinner of the family, a life insurance policy is the only option to decrease the financial stress related to death. However, insurance companies offer such plans to cover unfortunate deaths.Read more
Do life insurance plans cover death because of suicide? If they cover, then what are the types of plans that offer this type of benefit? Let’s look into the policy features for a good understanding of the topic:
Yes, a life insurance policy pays the nominee/beneficiary in case of the policyholder’s suicidal death. However, there are some clauses in the terms of payment related to a suicidal death claim.
The death benefit due to suicide is usually applicable to all types of life insurance plans such as term plans, savings plans, wealth plans, etc. that provide life cover. However, the scope of death benefits offered differs with different plans.
Moreover, a significant change in the clauses was presented in 2014 by the regulating authority of India, IRDAI, regarding the death claim related to suicide. So, any life insurance plan purchased after the year 2014 is paid in case of the suicidal death of the policyholder.
Rama was an account head at a large MNC in Delhi. Being an accountant, she understands the importance of a life insurance plan. Therefore, she thought of opting for a life insurance plan in her financial planning. One day, Rama commits suicide because of depression, and her family members were left without any financial backup. Since, Rama has purchased a life insurance plan before committing suicide that will provide Rama’s nominee, her partner, a lump sum amount.
Although suicide is not an unfortunate death, the insurance company provides a death claim to help the loved ones who are suffering from the person’s loss. The life assured might have committed suicide due to debt payment or mental illness, or emotional stress.
The insurer will reject the death claim to any bonus on maturity during the below cases:
Most life insurance plans have a provision that states that the insurer is not liable to pay if the life assured dies because of suicide within 12 months from the issuing date of the policy. The insurer is not eligible to pay if the death of the life assured occurs before the revival of the life insurance plan.
Life insurance plans generally provide coverage for suicidal death after completing 1 year. This gap of 1 year helps insurers to know that there is no case of fraud in insurance. If the policyholder’s death occurs within 1 year i.e., 12 months of the risk commencement, then the insurer offers a % of the premium amount paid. For example: if Rama had an eligible beneficiary/nominee, then he/she might get 70 percent of the premium amount.
An insurer is required to pay a certain amount if the policy tenure has lapsed and the paid-up amount remains unpaid.
Also, the insurer is not eligible to pay if any fraud in insurance is committed on the part of the life assured.
Most of the insurance plans have been updated after 2014 with the suicide provision. This simply means that a policyholder will receive some lump sum amount if he/she has an eligible beneficiary/nominee. If the life-assured has died after the fixed time of 1 year, nominees are liable for the death benefit.
Most insurers have strict guidelines for any kind of misleading detail provided by the life assured. In such scenarios, the beneficiary is not eligible to get any amount from the insurer. The insurer is required to pay only if the life assured has not committed any insurance fraud. In addition to this, if the life assured is insured in any group insurance plan, the nominee is not eligible for any payment.
Suicidal deaths have been rising in India because of several reasons. Emotional instability, dearth of education, debt, etc. are some of the important reasons. The reality is that the family members related to an individual who attempted suicide are going to get affected. So, a life insurance policy, especially a term insurance plan will protect the financial needs of the family in such cases. However, the T&Cs related to the plan differ depending on the insurance company and the policy.