Does Term Insurance Cover Suicidal Death?

Does Term Insurance Cover Suicidal Death?

Yes, term insurance covers suicidal death, provided the policyholder doesn’t commit suicide within 12 months (or the required waiting period as per the policy documents) of buying/reviving the term plan. People who understand what is term insurance and its benefits know that term plans cover death due to suicide, but only in certain conditions. This plan helps financially and emotionally disturbed families by paying the benefit amount. The benefit amount payable in case of suicidal death during the first policy year would be 80%-90% of the total premiums paid, which would be returned. For policies where the suicide occurs after the first 12 months of the policy issuance or revival, the entire sum assured will be paid. However, it is better to check with the insurer for the plan and specific T&Cs that are applicable on term insurance for suicidal death.

Understanding the Sensitive Nature of Suicides

Suicide is one of the most common causes of demise between age groups of 15 years to 29 years and 15 years to 39 years. The suicide rate in India has risen to 12.4 per 1,00,000 people, the highest ever recorded in India. As per the National Crime Records Bureau (NCRB) report released in April 2024, 1,71,000 people in India died by suicide in 2022. The common reasons behind suicide could be mental illness, lifestyle ailments, and financial debts, so forth.

The subject of suicidal deaths is extremely sensitive, affecting both families and communities in deep and complex ways. When discussing life or term insurance coverage for such cases, handling the matter with empathy and care is important. Life insurance coverage for suicidal deaths is largely determined by guidelines set by insurance providers and regulatory bodies, including the Insurance Regulatory and Development Authority of India (IRDAI).

Coverage Provisions and Waiting Period Guidelines

In India, term insurance policies come with specific guidelines about suicidal death coverage, particularly a waiting period, which is usually set for one year from the date the policy starts. If suicide occurs within this period, many policies offer a refund of the premiums paid rather than the full death benefit. However, once this waiting period is over, most policies provide full coverage for suicidal deaths. It's essential for policyholders to thoroughly examine their policy details to ensure they are fully aware of the terms, especially concerning waiting periods and coverage conditions.

How Does Term Insurance Covering Suicidal Death Work?

Let’s understand this with the help of an example:
Rupa’s husband, a 35 year-old man, bought a ₹1 Crore term insurance to secure his wife (Rupa). Within the policy term, i.e., after 12 months of buying the term life insurance plan, Rupa’s husband unfortunately committed suicide due to depression. In this case, you must be wondering if Rupa will receive the death benefit. The answer is Yes. Since Rupa’s husband committed suicide after 12 months of buying the term plan, Rupa (the nominee) will receive the death benefit upon claim intimation.

Did You Buy the Term Life Insurance Policy Before January 01, 2014?

A term life insurance plan not only covers suicide but also helps the life assured’s emotionally distraught family financially, simply by paying back some amount of the premium. This also depends upon the terms and conditions mentioned in the policy. The term plans that were issued from January 01, 2014, do provide a suicide death cover to the family of the policyholder, which is subject to the terms and conditions listed below:

• The suicidal death cover of a term life insurance plan is only applicable if the policy has been issued for 12 months or twelve months after the revival. In case the policyholder passes away due to suicide within the above-mentioned situations, the nominee will be paid the complete sum assured or, as per the policy clause, receive the death benefit. The coverage of suicidal demise after a year was simply to prevent insurance fraud, wherein any individual stuck in debt of finances will take an undue benefit of buying the term insurance policy and then will commit suicide so that the family can claim the death benefit. The insurance companies assume that a one-year time frame would be enough to discourage the policyholders and prevent them from making such an extreme choice due to the financial crisis.

• The above-mentioned clause for the term life insurance plan has been relaxed to cover suicide demises occurring with the term policy issuance of 12 months or the policy revival. In case the policyholder commits suicide within this frame of 12 months of the issuance of a policy or the revival the nominee will not receive complete death benefits, however, the term insurance company will pay a benefit to the nominee that equal to a specific percentage of the paid premium by the policyholder during the policy term.

* You can calculate the premiums applicable for the suitable term plan cover using the term plan calculator available online.

What are the Exclusions of Suicide Cover in the Term Insurance Plan?

There are certain exclusions to coverage of suicide within a term life insurance plan. It is important to understand the types of deaths covered and not covered in term insurance. The term insurance company might reject the claim under the following circumstances:

• If the policyholder passes away within 12 months of the policy being issued or the revival, then the nominee will receive a specific percentage of the plan premiums the policyholder pays. It is important that the term life insurance plan is active and the age of the policyholder at revival or entry is eight years and above.

• If the policy term of the term or life insurance policy has lapsed without the paid-up value being realized, then no claim will be paid to the nominee when the policyholder commits suicide.

• In case the nominee passes away before, the proceeds of the term life insurance plan are payable to the legal heir upon the suicide of the policyholder.

• In case any concealed or misleading information is given to the insurance company by the policyholder at the time of policy enrollment, it will lead to the rejection of a claim by the nominee.

How the Term Insurance Claim Works in Case of Suicide?

Term insurance claims on suicide come with specific rules, usually with a 1-year waiting period. Understanding the steps on how to claim term insurance after death can help ensure a smoother claim process for the nominee:

• Waiting Period Applies
  During the waiting period, most life insurance policies do not offer the full death benefit if the policyholder dies by suicide. In such cases, the insurer usually refunds only the premiums paid to the nominee or beneficiary. The exact terms, however, may vary depending on the specific policy conditions.

• Claim Documentation
  To process a claim, the nominee must submit the documents required to file term insurance claim form:

  • Death certificate specifying the cause of death

  • Original policy document

  • Completed claim form

  • Any additional documents requested by the insurer

• Investigation by the Insurer
  Term insurance companies may conduct an investigation to confirm the circumstances of the death. This is standard procedure to ensure compliance with the policy terms.

• Payout After Waiting Period
  After the waiting period is over, most life insurance policies in India provide full coverage even in case of suicide, paying the complete death benefit to the nominee or beneficiary. It’s important to read the policy documents carefully to know the exact terms and conditions for such coverage.

• Exclusions and Non-Disclosure
  Term Insurance Claims may be denied if there was non-disclosure of pre-existing mental health conditions or other policy-related fraud.

Does Term Insurance Cover Natural Death?

Now that we have understood the suicidal death in term insurance, let us see the coverage of natural death in term insurance in India. The answer to, ‘Does term insurance cover natural death?’ is yes, term insurance does cover death due to natural causes. 

If the policyholder passes away due to natural causes such as illness, medical conditions, or simply old age during the policy term, the insurance company pays the sum assured to the nominee. This makes term insurance a reliable financial safety net for the family in case of the policyholder’s untimely demise. However, it’s important to note that claims may be denied if there was non-disclosure of critical health information or if the death falls under specific exclusions mentioned in the policy, such as suicide within the first year. Always check the policy details to understand the coverage clearly.

Wrapping it Up

Suicide is never the right decision, and it shows an individual’s inability to fight against the odds. Live for the well-being and sake of your loved ones no matter what. If a policyholder believes that a term policy can alleviate all financial concerns for their family in the event of suicide, it's crucial to remember that the payment of the death benefit is subject to the insurance company's guidelines, increasing the risk of claim rejection. In the end, the personal loss coupled with the potential denial of a term policy claim forms a harsh blow that their family may find difficult to endure.

Note: You should also check the benefits of term life insurance if you are planning to purchase a term insurance plan.

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