Death by Suicide: Check Life Insurance Rules & Regulations

Suicide incidents are on the rise every year. There are a variety of reasons for suicide in India and coping with it is very upsetting for the family members of the deceased. Suicide is not typically an unexpected or unplanned occurrence on the part of the insurer. Whether or not the claim gets in the way of issuing the amount assured to the candidate depends on the policy terms. Life insurance plans usually cover suicide if the insurance coverage was obtained more than 12 months before death. This includes both conventional (endowment) and term life insurance plans and ULIPs.

Previous Life Insurance Rules For Death By Suicide

In the case of life insurance plans issued until 1 January 2014, there was a suicide provision where if the covered person (police holder) committed suicide within one year of the launch of the contract, whether or not the person was in good health at the time, the policy would immediately be considered as invalid and no claims will be paid to the nominees.

Note that such a provision can still occur in policies released at this time. In comparison, the time bracket could be 2 years for certain insurance providers.

New Life Insurance Rules In Case of Suicide

For policies offered after 1 January 2014, the terms and conditions have been modified to include the form of insurance policy kept. In the case of market-linked life insurance plans such as ULIP, the policyholder is entitled to earn 100% of the value of the policy fund on suicide within 12 months of purchase of the policy.

Under the case of standard benefits, if the policyholder commits suicide before 12 months, the claimant shall be entitled to at least 80% of the premiums paid, provided that the policy is in place.

Why is Suicide Covered After 1 Year?

Suicide is a legal threat to the insurance provider. To prevent insurance evasion, they are not covered by such life insurance plans. There may be a risk that the policyholder is in heavy debt and buys a life insurance policy to pay down the amount of the insurance. It is expected that 12 months would be enough for a person like this to be out of the way of thought.

However, for 1 year, suicide compensation is given to cover the mental or debt suffering that the dependents of the insured may experience after the death of the policyholder. As the main reason for opting for life insurance is to keep dependents' lives financially stable after their family member dies, supplying them with any assistance would help.

What Happens If a Loan Was Taken Against the Policy?

Suppose a mortgage loan has been made against the life insurance policy (where the money secured is higher than the home loan), the interest to be accrued on the loan to the bank (which would be a third party in this case) is protected. The policy must be active for at least 12 months and death must take place during the policy period.

Important Note

Suicide is a coward's act. One should get support from a variety of options available today to cope with suicidal thoughts. In addition, suicide insurance claims are reviewed before paying the amount of insurance to the nominees. Claims submitted by the nominee would be dismissed if the policyholder deliberately conceals material information (such as debt) from the insurer. Furthermore, the chances of denying claims are high, so there is no solution to anyone's debt issues.

Also, Read 

Life Insurance Mistakes Which Can Be Easily Avoided

How Do I File a Life Insurance Claim?

Disclaimer: This article is issued in the general public interest and is meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive and should research further or consult an expert in this regard.