If asked, most people would say that life insurance doesn’t cover death due to suicide and they would certainly have logic on their side. After all, what sense does it make that someone can buy large amounts of life insurance for pennies on the death benefit dollar, do themselves in, and their family still receives the money. Doesn’t sound like a sound business model to me.
But, with the exception of the two year suicide clause, that is exactly what will happen. The protection for the insurance companies lies in the fact that they most certainly don’t have to pay if someone takes out a policy and immediately goes out and takes their life. They also have in their favor that it is highly unlikely that a person will take out a policy with suicidal intentions and have the mental stability to wait it out for two years. So, for the first two years there is no benefit payable for suicide. During that period the company would return the premium paid, but nothing else.
The reason I bring this whole subject up is that the misconception can lead to families not even filing a claim if a loved one commits suicide. Their gut, as I mentioned, tells them that the claim would logically not be paid, so why even file it? Sometimes they drag their feet because they don’t think it will be paid and the policy will lapse.
Virtually all policies have the same clause, controlled by state law. A typical policy would have this wording: “Suicide. The benefits payable are limited if the insured commits suicide, while sane or insane, within two years of the issue date. In such case our liability will be limited to a return of all premiums paid to us.”
Bottom line. How often do we hear of a middle age breadwinner who for whatever reason, takes their life? If they had life insurance in force, the family should file a claim right away. If they just aren’t sure, they should call the company or consult an agent or an attorney to review the policy.