In addition to the deep and painful questions that follow the loss of a loved one to suicide, there are also practical and financial issues to be addressed.
If the loved one had life insurance, a common question is whether the policy will always cover the death.
Usually there is coverage if your loved one:
Had free life insurance through work, paid for by an employer
Was insured under an individual policy that started over two years ago (one year in some states)
Was insured under coverage that he purchased in the course of his work and that came into effect more than two years ago (one year in some states)
Even if the death is not covered, it is important to follow up with the life insurance company.
If the claim is denied due to suicide, the beneficiary usually owes a refund of the premiums that the policyholder paid for the insurance.
How individual life insurance deals with suicide
How a life insurance policy will handle suicide depends in part on the type of coverage – individual or paid by the employer. group life insurance. Individual policies are those that you purchase yourself; Group life insurance is the kind that you get through an organization, like an employer.
Virtually all individual life insurance policies contain a refusal to pay clause if the insured person dies of suicide for a period of time after a policy takes effect, says Paul Graham, senior vice president of Insurance Regulator and Chief Actuary of the American Council of Life Insurers. The period is the first two years for most policies and one year for some, depending on the state in which it was purchased.
“This is generally viewed by industry and regulators as sufficient time to prevent policies from being purchased by someone who intends to kill themselves,” Graham said.
If death by suicide occurs after this period, the life insurance policy will pay as it would for death due to illness or other insured causes.
If the suicide occurs within the excluded period, the life insurance company will not pay the death benefit. Typically, in this case, the insurer will reimburse the premiums paid for the policy, less any premiums that were owed before death, Graham says. If it was a whole life insurance or any other permanent policy, any loan outstanding against the cash value of the policy would also be subtracted, Graham says. The premiums refunded would go to the beneficiary of the policy.
How group life insurance deals with suicide
Group life insurance at work – if the employer pays for it – usually doesn’t have a suicide clause, Graham says. So if your loved one had free life insurance as part of their work, the coverage will usually pay a benefit. Contact the employer’s human resources department to find out how to file a claim.
However, group life insurance purchased by employees treats suicide the same way as individual policies, excluding it for the first one or two years. If death occurred within the excluded period, the premiums paid by the employee for the coverage would generally be refunded to the beneficiary.
You are not alone if you are dealing with the aftermath of suicide. Among American adults, 55% knew someone who committed suicide, according to a 2017 poll by Rasmussen Reports, a public opinion polling company. Data from the Centers for Disease Control and Prevention ranks suicide as the 10th leading cause of death in the United States
If you are putting the pieces back together after losing someone to suicide, the important thing to remember about life insurance is not to let the cause of death prevent you from filing a claim.