Everyone takes a life insurance policy to ensure that their family remains financially stable and secure even after their demise. However, what if there is a suicide of the policyholder? Will sum assured still go to the nominee in such a case?  

Not many people are sure about what happens if a policyholder of a life insurance policy commits suicide. There are many misunderstandings surrounding this so here are the facts about this scenario.

Depends on the insurance company

A lot depends on the insurance company that has issued the policy and its terms and conditions. However, most insurance companies do not cover suicide in the first 12 months since the policy was taken but it is covered after this time period has elapsed.  

In cases where suicide is covered after a certain amount of time has elapsed from the date of taking the policy, the nominee will receive the sum assured or death benefit if the policyholder has committed suicide after that time frame. However, if suicide is excluded from the clause of a life insurance policy, then the nominee will not receive any of the sum assured or death benefit, no matter how much time has elapsed since the policy had started. Still, if the suicide has occurred before the 12-month time period (or whatever period is applicable) the nominee will get a certain percentage of the premium that was already paid by the policyholder.  

Reasoning behind 12-month period

The reason most insurance companies have a 12-month period clause for suicide cases is to prevent insurance fraud, in the event that someone who has already decided to commit suicide takes an insurance policy with the intention of having his/her family provided for after their death. However, with the 12-month period, chances of this happening are less because it is thought that whatever the causes are that may push someone to commit suicide, whether it is debt, health issues, or other problems, will have a chance of getting resolved within 12 months.

Exclusions/terms for suicide claim in a life insurance policy

The following exclusions are taken from a leading insurance policy provider in India. According to the policy document, the following are the exclusions in the event of a suicide:

1. If the suicide happened within 12 months from the date of the policy’s commencement, then no claim will be paid to the nominee. However, if the policy was in force with the premiums being paid correctly, then 80% of the total amount of the premium paid so far, excluding any extra premiums, will be paid to the nominee.
2. If the life assured was below the age of 8 at the age of entry (age depends on the insurance company).
3. If the suicide happens within 12 months from the date of renewal, an amount will be paid to the nominee which will be more than either 80% of the premiums that were paid till that point of time or the surrender value.
4. If the policy has lapsed without the paid-up value being acquired, then no sum assured or percentage of premium shall be paid to the nominee.
5. If it is a unit-linked life insurance policy, then only the fund value of the units that were held until the time of death will be paid to the nominee.
6. If any information given at the time of enrolment of the policy has been found to be false or misleading, no claims will be paid to the nominee.
7. Group life insurance policies do not cover suicide because they are usually of one-year tenure anyway.

Suicide is never an option for any problem in life. If faced with any such challenges, it is best to talk to a close friend or family member, seek the help of a mental health professional, or contact any one of the reputed suicide hotlines that are available 24x7.