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Does the Term Insurance Plan Cover Suicide?

Mr Anand Kumar is an IT professional who took a home loan of Rs 20 lakh against the term insurance cover of Rs 40 lakh. Within the policy term, i.e., 12 months after the issuance of the term life insurance plan term, due to depression, Mr Kumar committed suicide. However, the liability of the loan didn't pass on to Mr Kumar's dependents. Instead, the term insurance company repaid the home as per the clause of suicide within the term policy, as the insurer received this information on the assignment policy before the demise date of Mr Kumar.

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Suicide is one of the most common causes of demise between both age groups of 15 years to 29 years and 15 years to 39 years. As per the data of the World Health Organisation, the suicide rate standardized in India stands 16.4 per 1, 00, 00 for the women that are sixth highest in the world and 25.8 when it comes to men and ranks twenty-second. The common reasons behind suicide could be mental illness, lifestyle ailments, and financial debts, so forth.

The Insurance Regulatory and Development Authority of India has amended the clauses of suicide for the term life insurance plan that is bought after 2014. The term insurance policies that have were issued before 2014, January 01 the nominee will not receive any death benefit in case the insured passes away due to suicide.

Does Term Insurance Cover Suicide?

Term insurance plan does cover suicide, and it financially helps the emotionally disturbed life-assured family by paying back some of the premium. But it all depends on the T&Cs of the plan. Term plans, which are issued from the date 1st January 2014, provide suicidal death coverage to the family of assured subject to the T&Cs.

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 insureds’ 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 that is subjected to the listed below terms and conditions:

  • 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 receives the death benefit. The coverage of suicidal demise after a year was simply to prevent the insurance frauds 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 the time-frame of one-year would be enough to discourage the policyholders’ and not take such an extreme choice due to 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.

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. 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 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 them upon the suicide of the policyholder. The legal heir will be eligible to receive the death benefit.
  • 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.

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.

Look before you leap!

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