The suicide clause and life insurance policy
A person who becomes depressed may consider taking her own life to leave her loved ones with the benefits from a life insurance policy.
In some situations, a life insurance policy's suicide clause will prevent the beneficiaries from receiving benefits. In place of suicide, some life insurance polices may use language such as "intentional self-destruction" or "death by one's own hand" to describe the act.
A suicide clause is one of several clauses or provisions that are standard in most life insurance policies, although these may vary slightly depending on the state. Others include a free look provision, which gives the policyholder a specified amount of time to examine a policy after it issued to see if he wants to keep it. An incontestability clause prevents the policyholder from voiding the policy after it has been in force for a specific period of time, unless the policyholder stops paying the premium.
A suicide clause means that policy benefits will not be paid to the policyholder's beneficiaries if she commits suicide within a specified time period after the inception of the policy. Whenever a policyholder dies within the time period covered by the suicide clause, the insurance company will typically investigate the claim closely to ensure that the death was not a suicide.
A suicide clause protects the insurance company against a situation where someone takes out a policy with the intent of killing himself so that his beneficiaries can profit. Because modern life insurance policies can easily have a face value of £65,000 or greater, the clause can save the insurance company from paying out a substantial sum of money.
A suicide clause typically covers the first one or two years that the policy is in force, depending on the insurance company. If suicide occurs during that time period, the company will only return to the policyholder's beneficiaries any premiums that have been paid to that point. If suicide occurs after the clause period, the company cannot deny coverage.
A suicide clause could have the added benefit of preventing a policyholder from taking her own life. For example, if a policyholder becomes suicidal six months after taking out a policy, then reads her policy and discovers that it will not pay a benefit if suicide occurs during the first two years, she may reconsider her actions.