Do life insurance policies cover suicide?
Does life insurance cover suicide?
The short answer is yes, though not straight away, and not by all life insurance policies.
It's important to carefully read the policy disclosure statement (PDS) before purchasing life insurance to ensure you're getting the cover you need.
In this guide we'll explore which life insurance policies cover suicide, and important considerations to be made while shopping around for life cover.
Life insurers in Australia may cover suicide, but a 13-month exclusion period typically applies. Check the PDS for terms and conditions of a specific policy.
Many term life insurance policies do offer benefits for suicide or self-harm, but TPD, trauma, and income protection insurance usually do not.
It's important to disclose any history of self-harm or mental illness during the application process, or it could result in a claim being denied.
Life insurance and suicide
People generally take out life cover hoping that they'll never have to make a claim.
It provides an added layer of security for your finances, so that your loved ones won't have to worry about money if something happens to you.
Life insurance covers unexpected deaths due to accidental injury or illness.
This can include events like cancer, car accidents, and heart disease.
It can also cover events that leave you permanently or temporarily unable to work, like loss of sight or limbs, paralysis, and brain damage.
There are four main types of life insurance, and each one is suited to different situations.
So how does life insurance work in the event of a suicide?
It's an especially delicate topic, but an important one to address.
Life insurers do cover suicide, but there are restrictions in place.
Insurers do what they can to reduce the likelihood of someone taking out a policy with the intention of committing self-harm.
Suicide is a serious issue that affects thousands of Australians every year. Suicide prevention organisation Lifeline reports that suicide is the leading cause of death for Australians between the ages of 15 and 44.
Death by self-harm is often a result of mental health issues like depression or anxiety.Compare & Save
Term life insurance
Term life insurance pays a lump sum benefit when the policyholder dies as a result of an illness or injury.
In many cases, this includes suicide, but only after an exclusion period has been applied---more on this later.
To find out whether or not your policy covers suicide, refer to your product disclosure statement, or PDS.
It will explain the details of what's covered, and any terms and conditions that may apply.
You will still need to meet these terms when making a claim; for example, the policyholder must have met all disclosure requirements, which may include providing information about any existing mental health issues.
TPD, trauma, and income protection
Most insurers will not pay benefits for suicide claims on TPD, trauma, critical illness, or accidental death insurance.
This includes claims for injuries related to self-harm or an attempted suicide.
Again, you can check the PDS of your policy to confirm the details. Suicide or self-harm may be listed as exclusions, which means they are not covered at all.
These exclusions are in place to protect policyholders who may be considering self-harm in order to provide their family with financial benefits.
Life insurance exclusion period
An exclusion period is like a waiting period.
It's an initial period of time during which a claim cannot be made on certain events, including suicide.
Australian insurers largely impose an exclusion period of 13 months on suicide claims from the day the policy begins.
This exclusion period is up to individual insurers and may vary in length.
As a basis for comparison, the United Kingdom implements a 12 month exclusion period on suicide, while the USA has a 24 month exclusion period.
If you upgrade your insurance or change policies, it can affect the exclusion period.
Always refer to the PDS for information on what you're covered for.
Concerns around exclusion periods
There is serious cause for concern related to exclusion periods.
A 2010 study found that while there were fewer suicides during the exclusion period, that number increased in the two years following the exclusion period.
The study also found that higher insured sums were related to higher rates of suicide.
Researchers suggested increasing the exclusion period to three years, but no regulations have been put in place to date.
The push for longer exclusion periods could help people who are struggling with suicidal thoughts, because it suspends what could be an additional incentive for acting on thoughts of self-harm.
As we referenced earlier, there are additional factors that may affect the outcome of a life insurance claim related to suicide.
Let's look at self-harm as a risk factor and how that affects benefit payouts.
Self-harm as a risk factor
Part of purchasing life insurance is conducting a risk assessment.
Your insurer will assess the level of risk that you present them, and that often means disclosing your medical history.
If you have previously attempted suicide or have been diagnosed with a mental illness, you will need to disclose this information or risk having a claim denied---regardless of the event leading to the claim.
If an insurer finds that you didn't disclose certain information when you initially took out the policy, it may give them grounds to deny any future claim that is made.
When you complete your application, answer any questions truthfully and to the best of your knowledge.
This can help avoid problems in future.
These may include questions related to mental health or drug and alcohol addiction.
While this may impact your life cover options, it's more important to be transparent in your application.
Otherwise, there's a good chance your claim will be denied.
Assessing a claim related to self-harm
Any time a life insurance claim is made, an investigation will occur.
The beneficiary will have to supply proof of the claim, which usually includes a death certificate and release forms about the policyholder's medical history.
This is when any non-disclosures may be revealed.
The investigation will check that all terms and conditions are met before deciding on the outcome of the claim.
Self-harm or suicide claims can be grey areas; for example, in the event of a drug overdose.
The investigation will look at whether the death was intentional or accidental, and whether there was a history of addiction.
This can be a difficult time for surviving family members, as you may have to answer questions about the circumstances of your loved one's death.
Our experts will help you compare policies and fill out your application, so you have the information you need right from the start.Compare & Save
Resources for support
If you, or a loved one, is suffering from mental illness or having suicidal thoughts, know that help and support is available. Here is a list of helpline numbers and online resources to help you:
Lifeline Australia (available 24 hours): 13 11 14
Kids Helpline: 1800 551 800
Suicide Call Back Service (provides 24/7 phone, video and online professional counselling): 1300 659 467
eHeadspace (free service for young people aged between 12-25, and their families): 1800 650 890
SANE Australia: 1800 187 263
These are just a few of the services available to you in Australia if you are looking for support.
For other services, click here.Compare & Save
The information contained in this guide is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. As such, it is important that you consider the appropriateness of any advice and the relevant product disclosure statement (PDS) before proceeding. Check with a financial professional before making any decisions.