How Life insurance companies handles suicide? In dictionary, suicide is defined as ‘an act to kill one self intentionally’. Unfortunately, this action has become very common today because of the high levels of stress and rising competition people have to face daily. According to WHO, every year almost one million people die by suicide. It is depressing that people are so compelled by the troubles in their life that they lose the will to live anymore and ultimately commit suicide.
When speaking of life insurance policy and suicide clause; the insurance companies introduced suicide clause in order to prevent themselves from losing money to policy holders who take policies with an intention to commit suicide in a short time period and thus, save their beneficiaries from financial crisis which may arise after their death.
Different life insurance companies have different clauses for suicides and because of this reason, it is essential for the policy holder to check their terms and conditions before signing the contract. However, if a company doesn’t specify anything about suicide in their contracts then most probably, the company will have to pay the amount covered in the policy to the beneficiary. If the policy is permanent one then the company will have to pay death benefit equal to the cash value of the policy. On the other hand, if there is term insurance policy then the company will have to pay an amount equal to the amount which the policy holder chose at the time of signing contract. Moreover, there are some policies which have minimum death benefit; in this case if nothing is mentioned about suicide then the company will have to pay an amount equal to the minimum death benefit.
Nowadays, most of the life insurance companies have set up suicide clause in their policies. This clause states that if an individual commits suicide within a specified period of time, which in most policies is two years, then the life insurance company would pay nothing to the beneficiary in the policy. However, if the policy holder kills himself or herself after the specified period of time then the company will pay money depending upon the policy which the insured purchased before his or her death.
Of course, there are people who will try to find a way to sidestep suicide clause. In order to ditch the suicide clause, people can try to make their death look like an accident so that their beneficiary can get the money. However, if any suspicion is there that the death can be act of suicide then the life insurance company would launch a formal investigation before paying out the money.