Does Life Insurance Plans Pay for Deaths by Suicide?

Life insurance policies are introduced to protect the financial security of the family members in case of the unexpected death of the policyholder. If the policyholder is the sole earning member in the family, a life insurance plan is the way to reduce the financial burden associated with death. However, insurers have designated such policies to cover uncertain deaths.

Many people aren’t aware of whether death due to suicide is considered in life insurance and term insurance plans. Individuals often wonder, do life insurance plans pay for deaths by suicide? If considered, what are the types of plans that provide this feature? Let us understand this in detail.

Does a life insurance plan pay for suicidal deaths?

Yes, life insurance provides a sum assured to the nominees in case of the suicidal death of the policyholder during the policy term. However, this depends on policy rules. Insurers usually include specific provisions related to payment terms associated with a suicidal death claim. Understanding all terms helps ensure your family is protected during difficult times.

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.

A major change in the provisions was introduced in January 2014 by the Insurance Regulatory and Development Authority of India (IRDAI) regarding the death claim associated with suicide. The following are life insurance plans which provide a suicidal death benefit.

Term insurance plans

Term insurance plans give a high cover for a specific term. When suicide happens after twelve months from the start or revival of a policy, the nominee is eligible to receive the benefit as mentioned in the policy terms.

Endowment and savings plans

These plans offer life cover along with a savings feature. After the first twelve months, suicide is usually included, and the nominee can receive the assured amount or the eligible benefit as per the specific policy terms.

Unit-linked insurance plans (ULIPs)

ULIPs provide life cover along with market-linked* growth. If suicide occurs after twelve months, the insurer pays either the fund value or the assured amount, depending on the rules and conditions mentioned in the policy document.

Whole life insurance plans

Whole life plans provide cover for the entire lifetime. If the insured person dies by suicide after one year, many plans pay a death benefit to the nominee based on the policy rules and conditions.

Child insurance plans

Child insurance plans protect a child’s future. If the parent covered under the plan dies by suicide after the twelve-month waiting period, the child, as the nominee, receives the benefits mentioned under the policy rules and conditions.

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, a life insurance plan provides life cover and the sum assured to the nominee if the policyholder’s suicide death 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 the debt and commit suicide after a few months. For the insurers to escape such a situation, the regulation provided a 12-month 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 sudden 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?

A term insurance claim in case of suicide has a revision of the policy terms if purchased after January 2014. Tata AIA term plan provides complete details 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?

In the 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 securities 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

Life insurance policies in India provide financial protection to families, including cases of death by suicide. Many plans cover suicide after completing twelve months from policy purchase or revival. During the first year, beneficiaries receive 80% of premiums paid or the surrender value, whichever is higher. ULIP policies pay the fund value for first-year suicides. These provisions balance protecting families during difficult times while preventing policy misuse. Always read your policy document carefully to understand specific terms.