Suicide doesn’t always justify denial of a life insurance claim
One of the hardest things any of us can face in life is the death of a loved one. When that death comes by way of suicide, however, the grief, guilt, and despair are particularly overwhelming for surviving friends and family members. Unfortunately, death by suicide is on the rise in the United States, having claimed nearly 45,000 lives in 2016 alone.
Notwithstanding the great personal toll that suicide takes on survivors, the sadness is often compounded by the difficulties in dealing with the decedent’s estate. Life insurance policies, in particular, can be incredibly tough to negotiate when you’re dealing with the tidal wave of grief that accompanies a self-inflicted death.
In fact, many people presume that a life insurance company will always deny a claim if the policyholder committed suicide. Relatedly, people tend to assume that life insurers will always pay claims involving deaths that are not deemed to be the result of suicide. Neither belief is true.
In this article, we will explore the unpredictable ways that life insurance companies deal with the issue of suicide. Denial of death benefits can have devastating effects on families. Our goal is to help you avoid improper denials during this incredibly difficult and confusing time.
Why life insurance companies often deny claims based on suicide
Ultimately, life insurance companies are like any other business – they exist to generate profits. On some level, we can all understand why suicide is such a tricky situation for insurers. If a policyholder kills herself shortly after obtaining a new policy, the small amount of premiums she paid before her death would not likely cover the amount the insurer would have to pay to her beneficiaries.
While this can seem harsh from an emotional standpoint, there may also be a saving grace behind it. If insurance companies were in the habit of paying suicide benefits for brand new policyholders, desperate individuals might be tempted to take their own lives in an effort to reap monetary benefits for their surviving family members.
Not all life insurance policies prohibit death benefits in every case of suicide, however. As we’ll see below, there are times when the insurer must pay beneficiaries notwithstanding the fact that the policyholder took his own life. There are also times when a company will deny benefits based on suicide, even though the coroner has ruled a different cause of death.
Much to the surprise of many surviving family members, not all life insurance policies prohibit payment when the cause of death is suicide. In fact, many policies expressly allow for death benefits in cases of suicide, so long as the death doesn’t occur too close in time to initiation of the policy.
Typically, these provisions (known as “Suicide Clauses”) require the policyholder to live at least two years past the date the policy became effective. Note, however, that there are a couple of important exceptions that insurance companies use to deny claims even if the policyholder lives beyond that two-year threshold.
First, if the policyholder had a history of serious depression that was not revealed in the application process, the insurer may deny a claim. In these cases, the insurance company argues that omitting the history of mental illness was a material misrepresentation that relieves it from honoring the policy.
Secondly, insurance companies are often keen on setting policyholders up with “new and improved” policies. They may offer lower premiums, higher payouts, or other benefits that result from entering into an updated policy. What they often fail to inform consumers, however, is that each time a policy is renewed, provisions like the Suicide Clause are reset.
What that means from a practical standpoint is that a policyholder can pay on the same life insurance policy for 15 years, enter into an upgraded policy with the same insurer, and lose the time he accumulated against the Suicide Clause. Thus, if he takes his own life less than two years after the policy upgrade, the insurer will likely deny death benefits to his beneficiaries.
An insurance company can overrule the coroner
In some particularly shocking situations, insurance companies will declare a policyholder’s death a suicide even though the county coroner – after a thorough post-mortem examination – has reached another conclusion.
In one famous case involving actor Heath Ledger, the young man’s life insurer ruled his death a suicide and used that conclusion to deny a $10 million death benefit to his daughter. The coroner, however, had concluded that Mr. Ledger died from an accidental overdose of prescription medication. The young girl, who was traumatized enough from her father’s death, ended up having to sue the insurance company over its denial of the claim. She eventually settled out of court for an undisclosed sum.
In other cases, insurers have determined the cause of death to be suicide even though the coroner concluded death came by way of car accidents or homicides. Unfortunately, in each instance, the surviving family was left to fight the insurance company’s decision in court. In every case, this only exacerbates the pain of the loss.
What to do when facing the denial of a life insurance claim due to suicide
We understand that a loved one’s suicide is an incredibly difficult situation. We also know that dealing with claim denials by life insurance companies at this time can be convoluted, confusing, and maddening. That’s why we’re here to help.
We have been battling denials of life insurance claims for years. When it comes to denials based on suicide, we’ve seen it all. No matter what the circumstances of your loved one’s death, we have the experience and expertise to battle the insurance company for you. We know how to talk to coroners – and other experts if necessary – to get to the bottom of the situation and to help you realize the benefits that are owed to you.
If you’re facing denial of a life insurance claim based on suicide, please feel free to give us a call.
Contact us today if you have a delayed or denied life insurance claim.