The Truth About Suicide & Life Insurance

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It doesn’t matter how old you are, what your financial situation is, or the status of your health. Suicide and its contributing factors can affect anyone, and for those left behind, it’s something that can never be fully understood. 

Unfortunately, it is a reality for some. Suicide is the cause of death for nearly 30K people each year in the U.S., and many of them have life insurance policies. The number one question regarding suicide and life insurance is if policy beneficiaries would receive any benefits if the policyholder takes their own life. After suffering the loss of a loved one, times can seem even tougher if a life insurance claim is denied. However, take heart if you’ve found yourself in this situation, because there’s a big misconception about suicide and life insurance.

The Myth and the Truth

From religion to law, suicide has lent itself to many official and unofficial “rules,” myths, and cautionary tales. It’s not surprising that insurance made its way into the mix, and many people incorrectly believe that if you commit suicide, your life insurance will refuse to pay out — bottom line.

In actuality, that’s not always the case. The answer is actually in an individual life insurance policy. Many life insurance policies, just like any other insurance coverage, come with certain exclusions that null and void any benefits should you expire in a certain way, i.e., suicide. However, there can be fine print attached to that exclusion. Some policies will pay benefits even if the policyholder committed suicide, but the policyholder would have had to committed suicide after holding the life insurance policy for two to three years depending on the carrier.

Obviously, this kind of fine print is built into insurance policies to prevent people from buying the best life insurance possible and then killing themselves the moment the ink dries and the premium payment clears. Movies have turned such unfortunate scenarios into bittersweet tales of desperate parents (or spouses, etc.) buying life insurance and then committing suicide in order for their children (or others) to receive policy benefits. However, unless one committed suicide within the first two years of their policy, the insurance company will likely return the premiums paid, but no added benefits would go to loved ones. No matter what, in such scenarios, any family members left behind should consult the insurance company if the policyholder has committed suicide. It’s probably going to be the furthest thing from your mind if a loved one is no longer here, but don’t wait to file a claim, particularly if there’s a child involved as a beneficiary.

Denial of Benefits Due to Mental Illness

Overall, getting a life insurance payout is extremely successful. According to the American Council of Life Insurers (ACLI), 99% of all life insurance claims are paid in full, contrary to popular belief that insurers constantly look for reasons to deny them, but you must be paid up premium-wise in full to receive benefits, regardless of how you die.

And what about the claims that aren’t paid? Well, we already know if someone commits suicide before a policy’s exclusion limitation, it’s possible the beneficiaries won’t receive benefits. What about after that two or three year period that’s found in most policies? Sadly, it’s possible beneficiaries may still be denied payment. This is actually very common in such scenarios.

Some policies come with a separate exclusion that addresses non-disclosure of mental health and/or drug or alcohol addiction/dependencies. To receive life insurance, many companies require you to take several health tests and submit them, but sometimes, tests are completely optional. Mental illnesses are also taken on a case-by-case basis. If you have a history of serious depression and your life insurance carrier doesn’t know, you run the risk of eliminating any benefits if you commit suicide. Leaving out information like this allows insurance companies to deny benefits based on a contestability clause.

If you have a mental illness or addiction, it’s not as easy as “checking the non-smoker box.”  Unfortunately, if you disclose your mental illness or addiction, even if you manage it through medications and therapy and/or have been sober for a significant period of time, your eligibility for life insurance may be hurt. At that point, you could try getting life insurance through an employer or trade union, but the benefits are going to be smaller. If you’re diagnosed with a mental illness after you’ve bought your life insurance policy, you will still be covered, and the insurance company is not allowed to raise your rates based on “Guarantee of Insurability.”

When Insurers Don’t Want to Pay

Even if your life insurance policy is paid up and you know it front to back,  your loved ones may still be denied benefits. In some recent cases, on the grounds of suicide — even if it wasn’t suicide.

In March 2011, a Montana widow, Jane Pierce, shared her own personal story about just that. Her husband’s life insurance company accused her husband, Todd, of committing suicide. Todd had been fighting cancer for several years when he was in a freak car accident that took his life at age 46. Although his death was determined to be an accident, MetLife, Todd’s life insurance company, told Jane he had committed suicide, and his claim was denied. They claimed he had taken a lethal amount of painkillers, despite the fact that the medical examiner explained that the high levels of the drug on his toxicology report were from the medical treatment he received after the accident. Jane eventually sued to get the $224K in policy money, but the insurance company still denied any wrongdoing on their part and didn’t pay interest on the money they’d held during the dispute.

One of the most recent, famous cases of a denied life insurance claim involving suicide speculation, accidental death, and denied claims, was the death of actor Heath Ledger in January 2008. According to the New York Medical Examiner, Ledger’s official cause of death was “acute intoxication” of prescription medications. The combined effects of two painkillers, three anti-anxiety/sleeping medications, and a cold medication resulted in his accidental death. That didn’t stop his life insurer from refusing to pay a $10 million policy though. Ledger bought the policy only seven months before his death, naming his three-year-old daughter, Matilda, beneficiary. The insurer first denied it on the grounds of his policy’s two-year contestability period, citing the “suspicious” cause of death warranted an investigation, and possibly claim denial because it may have been suicide. When it was no longer ruled a suicide, it still took a lengthy lawsuit from Ledger’s estate to get Matilda an undisclosed percentage of the $10 million, held in a trust until she’s 18.

While many life insurance claims are paid out, denied claims and other hang-ups can result in a long, hard road to payment. The previously mentioned contestability clause and other loopholes often result in benefit payments being delayed. Although 99% of policies are paid out in full, it’s not clear how many of those payments were withheld for any amount of time past when they “should” have been paid out (by reasonable standards), initially denied, or that were only paid out after a lawsuit against the insurer. According to the most recent data, from 2009, from the ACLI regarding the amount of contested life insurance payouts, insurers in the U.S. were disputing approximately $1.3 billion in life insurance claims. That amount includes $396 million in denied claims from 2009. At the same point in time, insurers had paid out a collective $59 billion in claims.

Unfortunately, while Jane Pierce and Ledger’s estate sued, many don’t. If someone is absolutely wronged by the insurer and/or mistakenly denied a claim, they may not know how to take appropriate action, have the funds to do so, or know that they’ve even been wronged. Hopefully none of us would ever have to go through such an ordeal, but if you ever have to make a life insurance claim and are denied on such grounds, don’t rely on the insurance company to let you know when they’ve incorrectly done so and always seek an expert opinion.

Receiving Benefits

The issue of suicide is a serious, and life insurance is usually the last thing on most people’s minds if they’ve reached such an unfortunate state of mind. However, due to the fact that suicide is often a rash, spontaneous, and impulsive decision, there have always been and always will be situations where policies are in place either long before the unfortunate passing or at least purchased in the fairly recent past.

Regardless of how you pass, insurance companies may try to wrongfully deny death benefits to the people you love and want to support after death. Even when you’re aware of all policy exclusions, your beneficiary should know the ins and outs of the policy as well. You need someone fighting for you after you’re gone, sadly to possibly fight for what you wanted for them.

If you or a loved one is depressed and considering suicide, seek help through local resources and national foundations like the CDC Suicide Prevention center.  If you or someone you love is possibly abusing alcohol or drugs, seek help through a trusted source like the National Council on Alcoholism and Drug Dependence.  The Substance Abuse and Mental Health Services Administration is a great resource for both also, currently leading the country through April as National Recovery Month.

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