Does Life Insurance Cover Suicidal Death?

Does a Life Insurance Plan Pay for Suicidal Deaths?

Yes, a life insurance policy provides life cover to the nominees in case of the policyholder’s suicidal death during the policy term. However, this depends on the policy’s terms and conditions. Insurance companies generally include some specific clauses related to premium payment terms for a suicidal death claim. Understanding all these rules helps make sure your loved ones are protected during the difficult times.

What Are the Types of Life Insurance Plans that Provide a Suicidal Death Benefit?

Most standard life insurance policies offering life cover, whether through long-term savings plans, wealth policies or a pure term plan, have a suicide clause. Their terms and conditions can differ given the type of life insurance plan. The Insurance Regulatory and Development Authority of India (IRDAI) has issued revised guidelines for the suicide death claim in Jan 2014.

The following are the life insurance plans that offer a suicide death benefit:

• Term Insurance Plans: These plans provide a very high sum assured at a very reasonable premium.

• If the suiciding policyholder dies within one year of the policy commencement or revival, the full death benefit is paid to the nominees.

• Endowment and Savings Plans: Endowment plans offer life cover with savings. After the initial 12 months, suicide death is normally covered, and the sum assured (or benefit payable) is paid to the nominee.

• ULIPs (Unit Linked Insurance Plans): ULIPs consists of investment and insurance coverage. In case of death by suicide after one year, the insurance cover will apply. The nominee will be paid the amount from the fund or sum assured through the policy.

• Whole Life Insurance Plans: Whole life insurance plans offer coverage till the age of 99. Suicidal death is covered after one year if the policy has been taken out for more than one year and the plan does not have any special exclusions.

• Child Insurance Plans: If the parent (life assured) dies by suicide after the 12-month waiting period, the child (nominee) receives the benefits as per the policy.

What was the General Provision for Suicidal Deaths?

The Indian regulating authority, IRDAI, presented a new change in provisions regarding the death claim related to the suicide of the policyholder in 2014.

According to the old provisions, all the life insurance policies purchased before January 2014 will offer no death benefit in case of suicidal death during the first 12 months of the policy issuance/revival. This means that the policy would be invalid and the death claim filed on a suicidal death would not be payable. This provision was created to help insurance companies escape insurance fraud. For example, a person might have a few financial liabilities and, to escape them, purchase a life insurance plan. After a few months, the policyholder commits suicide to cover the debt amount with the life insurance payout.

What are the New Provisions of Suicidal Death Benefits?

According to the new changes, term insurance plans issued after January 2014 will provide at least 80% of the premiums paid on the death of the policyholder during the first 12 months of policy issuance/revival. Therefore, any life insurance plan purchased after the year 2014 pays the death claim in case of the suicidal death of the policyholder.

For example:

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 considered opting for a life insurance plan in her financial planning. A few years later, Rama commits suicide because of depression, and her family members are left without any financial backup. Since Rama had purchased a life insurance plan before committing suicide it will provide Rama's nominee with a lump sum amount.

For suicidal death occurring after the completion of the first 12 months of the policy issuance/revival, the death benefit will be paid as usual. That means the entire sum assured on death will be paid to the nominee of the policy in a lump sum amount.

Why Does Life Insurance Cover Suicidal Death India?

Although suicide is not considered an unforeseen death, the insurance company provides a death claim to help the family suffering from the loss of a loved one. There are a number of reasons why the life assured might have committed suicide. It can be due to debt payment, mental illness, emotional stress, or other such reasons. This payout can help the family members take care of their financial obligations and maintain their current quality of life.

Exclusions of Suicidal Cover in Life Insurance Plan in India

There are some common exclusions in life insurance policies in India. 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 80% of the premium amount paid. For example: if Rama had an eligible beneficiary/nominee, then he/she might get 80 percent of the premium amount paid until that point.

• An insurer is not required to pay the claim 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.

Do All Life Insurance Plans Pay for Death Because of Suicide in India?

Most insurance plans were updated after 2014 with the suicide provision. This simply means that a policyholder will receive a lump sum amount if he/she has an eligible beneficiary/nominee. If the life assured dies after the fixed time of one year, nominees are liable for the death benefit.

What Are the Cases When You Are Not Eligible for Suicidal Cover?

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.

What is the Suicidal Death Claim Concerning ULIP?

In the ULIP plan, there is a slight change in the clause. Let’s say the policyholder’s death is within a year (12 months) of the inception of policy. In such a case, the nominee or the family members will be eligible to get the fund value or the value of the policy account at the time of death intimation.

The ULIP fund value refers to the money that is made after the part of the premium paid in the securities market. This is mainly the market-linked returns. Any charges (other than fund management charges) can be recovered after the demise will be added to the death claim and then paid to the nominee.

Wrapping It Up!

Suicidal deaths have been rising in India for several reasons. Some important reasons are emotional instability, dearth of education, debt, etc. The reality is that the family members related to an individual who attempted suicide are going to be affected. So, to answer the most commonly asked question, "Is suicide covered in life insurance?" Yes, a life insurance policy will protect the financial needs of the family in case of suicidal death or death occurring after the completion of 12 months of policy issuance/revival. However, you must compare plans online and go through the T&Cs related to suicidal death before purchasing the most suitable policy.

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