By Alessandra Suuberg, Decency LLC
The purpose of a life insurance policy is to provide a death benefit (payment) to beneficiaries when the insured individual (“the insured”) dies.
But what if the insured takes their own life?
In the United States, readers may have heard that “[s]uicide is not typically covered in the first two years of a life insurance policy.” (In addition to the linked source, you can find similar statements here and here.) This type of rule can be embodied in a “suicide clause” in the policy.
Life insurance policies outside the U.S. may similarly contemplate and address deaths related to suicide.
For example, the following sources address suicide and life insurance in:
India, discussing suicide clauses and legal changes occurring in 2014;
The UK, noting that insurance companies do not want people to have “a financial incentive to take their own lives”;
New Zealand, noting, here and here, 13 months as a typical timeframe during which suicide would not be covered by life insurance;
Canada, referring to a 24-month “industry standard . . . to refuse to pay benefits when the insured dies by suicide”; and
The Philippines, also noting suicide-related exemption or exclusion periods in Japan, Belgium, and Greece.
What is the purpose and history of suicide clauses in life insurance policies?
As mentioned by the UK source above, insurers may be concerned about leaving a monetary incentive for suicide.
This concern has been echoed by researchers in Australia (2010), who suggested that extending the suicide-exclusion period to three years “may prevent some ‘insurance-induced’ suicides,” and in Japan (2010), arguing that “financially motivated suicides could be prevented by excluding suicide from death benefit.”
Additional research in Japan (2017) studied “suicide for the purpose of gaining insurance payouts.” The study’s authors concluded that men in their 40s to 60s “are at a greater risk” for insurance-related suicide, and that these suicides “appear[ed] to be associated with debt.” The authors advocated for further research to “develop more effective prevention measures for this kind of suicide.”
Meanwhile, if one refers to Canadian legal scholarship dating back to the 1930s, another historical reason for suicide clauses comes into view:
Insurance companies may have adopted these clauses “for the express purpose of benefiting the estate of the [insured] in case of suicide.” Writing on this topic in 1939, one Canadian author described the case of a suicide clause held to be unenforceable; the reasoning: “suicide is a crime, and consequently, the benefit accruing to the estate of the assured upon his death by suicide is a benefit to a person committing a crime which cannot be recovered by his personal representatives.”
Thus one can see different reasons for the use of suicide clauses, both to ensure a benefit to the insured’s estate in the case of suicide, and to avoid a financial incentive for suicide.
Particularly in terms of the latter rationale, one can also see how a seemingly simple legal clause—a term in a contract—might have an important influence on public health.
Disclaimer: The information and opinions on this site do not include legal advice or the advice of a licensed healthcare provider.