Life insurance policies are exclusively introduced to protect the financial security of the family members in case of an unexpected death of the policyholder. If the policyholder is the sole earning member in the family, a life insurance plan is the only way to reduce the financial burden associated with the death.

However, insurers have designated such policies to cover uncertain deaths. Does a death due to suicide considered in a life insurance plan? If considered, what are the types of plans that provide this feature? Especially, does term insurance cover suicide? Let us understand the policy conditions in this regard for a better understanding.

Does a life insurance plan pay for suicidal deaths?

Yes, a life insurance plan pays the nominee in case of the suicidal death of the policyholder. However, there are specific provisions related to the payment terms associated with a suicidal death claim.

What type of life insurance plan provides a suicidal death benefit?

The suicidal death benefit is generally applicable to all types of life insurance policies, such as savings plans, wealth plans, term insurance plans, etc., that have an element of life cover in it. However, the extent of the death benefit provided varies with different plans.

Also, a major change in the provisions was introduced in January 2014 by the IRDAI (Insurance Regulatory and Development Authority of India) regarding the death claim associated with suicide. Nevertheless, most of the plans have the same features as the term plan, and there is a total variation only with respect to the Unit-linked life insurance (ULIP) plan. So, let us discuss the guidelines for coverage of death by suicide based on the term plan and later about the provisions in a ULIP plan.

Insurance in case of suicide

The death claim associated with a suicidal death can be classified based on two phases, before January 2014 and after January 2014. Here is a brief detail about that.

What was the general insurance provision for suicidal deaths?

 

The suicide clause mentions that if the policyholder commits suicide before January 2014 within 12 months of policy inception or revival, the policy stands void and rejected for a death claim. Generally, the life insurance plan provides life cover and the sum assured to the nominee if the suicide death of the policyholder occurs after a minimum of twelve months from the date of purchase of the plan. However, during the policy term and after twelve months, the term insurance death benefit is provided based on certain terms and conditions of the policy. Therefore, any exclusion related to suicide was to be realised and understood before purchasing. 

Suicidal deaths were considered and paid after 12 months to help the insurer escape from insurance fraud. For example, there might be a scenario wherein people avail of a home loan or a car loan and later purchase a life insurance plan to cover up for the debt and die by suicide after a few months. For the insurers to escape such a situation, the regulation provided a 12 months duration. 

Why does the insurer provide a suicidal death claim?

Though suicide is not an uncertain death, the insurer provides a death claim to help and reach out to the family members suffering from the uncertain loss. The policyholder might have died by suicide because of debt considerations or emotional stress, or severe mental illness. Either way, the family is affected, and the sole purpose of a term plan is to help such families recover from the financial crisis. 

 

What are the new provisions as per the life insurance plan?

Term insurance claim in case of suicide will have a revision of the policy terms if purchased after January 2014.Tata AIA term plan provides complete detail of the provisions regarding such an exclusion in the policy while purchasing it or reviving it for any reason.

In case the death due to suicide occurs within 12 months of the policy purchase, revival, or the commencement of risk, the policyholder's family will be entitled to receive at least 80% of the total premium amount paid until death. It can also be equal to the surrender value of the policy, whichever is higher. This provision is ensured provided the policy is in force. 

What is the suicide death claim concerning ULIP?

With respect to a ULIP plan, there is a slight variation in the provision. Suppose the policyholder's death is within 12 months of the policy inception. In that case, the nominee or the family members will be entitled to receive the fund value or the policy account value at the time of death intimation.

The fund value refers to the quantum of money made after investing the portion of the premium paid in the security market. It refers essentially to the market-linked returns.

Any charges other than the fund management charges recovered after the death will be added to the death claim and paid to the nominee. 

Conclusion

The deaths due to suicide have been increasing in India due to various reasons. Debt, emotional instability, lack of education etc., are some of the possible reasons. As a matter of fact, the family members associated with the person who attempted suicide are set to get affected.

Therefore, a life insurance plan such as a term plan will protect the family's financial needs under such scenarios. However, the terms and conditions associated with the plan vary based on the insurer and the plan.

L&C/Advt/2021/Jun/1054