The purpose of life insurance is to provide financial security for the loved ones of the individual that carries a policy. However, many people who are interested in purchasing coverage are concerned that the insurance company won’t pay out the death benefit to their beneficiaries when they pass away. Typically, this is not the case. In most instances, life insurance policies do pay out.
However, there are times when a provider won’t pay out a life insurance policy. For example, in cases of suicide, there’s a chance that the death benefit will not be dispersed; but, that’s not always the case. Usually, there are terms associated with a life insurance policy, and one of those terms is a suicide rider.
To learn more about a suicide rider on a life insurance policy, including what it is and how it works, please continue reading.
What is a Suicide Rider?
A suicide rider, or clause, is a stipulation that is effective on a life insurance policy for a short period of time; typically, two years after the policy goes into effect.
Usually, a life insurance death benefit will be paid out when the carrier passes away, but if it’s believed that the cause of death was the result of self-inflicted harm, or suicide, then the death benefit will not be paid out.
The point of a suicide rider is to prevent the insured from purchasing coverage with the intent of killing him- or herself so that his or her beneficiaries can receive the policy’s death benefit. As mentioned, a suicide rider is usually only effective for two years after the insured purchases a policy. Once that two year time period passes, however, there is possibility that the insurance company will pay out the death benefit if the insured does commit suicide. For instance, if the insured causes a self-inflicted injury on him- or herself five or 10 years after the policy is effective, the insurance provider may pay the policy’s death benefit to the beneficiaries.
Are There Exceptions?
There are instances when a life insurance company will pay out a death benefit even if the insured does perish as a result of self-inflicted harm within two years of purchasing the policy. For example, if the policy holder passes away as a result of a drug overdose and it’s determined that the overdose was accidental and not intentional, then the death benefit on the insurance policy may be paid out.
What About Physician-Assisted Suicides?
Physician-assisted suicides, also referred to as “right-to-die”, occurs when a person is diagnosed with a terminal illness and chooses to end his or her own life with the assistance of a physician rather than allowing the illness to take his or her life.
In these cases, a life insurance policy will not pay out a death benefit within the first two years of coverage. For example, if you purchase a life insurance policy after you found out that you had a terminal illness and then decided to proceed with a physician-assisted suicide a six months or a year after your policy went into effect, the death benefit would not be paid out to the beneficiaries. Why? – Because, in the eyes of the insurance company, the policy was purchased with the intent of dying soon after being diagnosed with a terminal disease to benefit your loved ones.
With that said, if you are diagnosed with an aggressive form of cancer, AIDS, Parkinson’s disease, or any other terminal illness and decide on a physician-assisted suicide more than two years after you purchased coverage, the death benefit would be paid out.
Is There Any Other Times when a Life Insurance Policy Won’t Pay Out?
In addition to a suicide rider (if a suicide is the cause of death two years or less after purchasing a policy), there are other instances when a life insurance policy may not be paid out.
During the contestability period, there is a chance that a death benefit will not be paid out. Like a suicide rider, the contestability period is effective for two years after purchasing a life insurance policy. During this time, a carrier can contest the death benefit and refuse to pay out. If, for example, a carrier investigates the death and fraud is determined, then the policy will not be paid out.
Summing It Up
Life insurance does cover suicide; however, it will only cover it two years after the policy has been purchased. Because of a suicide rider, the policy will not be paid out if the insured commits suicide within two years of purchasing coverage. To learn more about suicide riders on life insurance policies and how they may affect you, speak to a reputable insurance agent. It’s important to understand how you – and your loved ones – are protected by your policy.