Life insurance is bought to ensure financial protection for the loved ones by the policyholder. It is primarily intended to serve as a financial cushion for the dependents of the deceased. We refrain from talking about death because it is a morbid topic, but the fact is that death can knock on the door without prior notice. Life insurance policies are in place to provide for such uncertainties: death in a brutal accident, an assault of a critical illness or death through natural causes and ageing. On the other hand, there are instances of death where life insurance policy will not cover the beneficiaries, like when the policyholder dies in an accident while being involved in an adventure sport, or if the victim was driving under the influence of alcohol. Death due to pre-existing health conditions is also usually excluded from life insurance plans.
But there are grey areas too - for instance, how do you treat the case when someone dies by suicide? Suicide is when someone intentionally causes their own death.
Despite the stigma and the taboo associated with suicide, it is a reality and we have numbers that call for a reckoning: According to the World Health Organisation, across the world close to 800,000 people die due to suicide every year. Closer to home, suicide is the ninth leading cause of death in India as per research. With 17·8% of the global population, India accounts for 36·6% of the global suicide deaths among women and 24·3% among men.
We are increasingly becoming more aware on the topic of mental health. People now understand that suicide is not an act of cowardice or crime. According to Section 115 of the Mental Healthcare Act, passed in the Indian parliament in 2017, suicide attempters are presumed to have severe stress and should not to be punished. In line with that, the Act decriminalised suicide, so that the government takes it upon itself to provide care, treatment, and rehabilitation to reduce the risk of recurrence. And to trigger other developments: people openly seeking help, improvement in epidemiological data, better planning, and resource allocation. But how do the life insurance providers deal with this?
Does life insurance pay for suicidal death in India?
The Insurance Regulatory and Development Authority of India (IRDAI) specifies that there should be a suicide clause in the policy that governs this aspect. In most term insurance plans like the Future Generali Express Term Life Plan , the policy gets void if the life assured dies by suicide within one year of taking the insurance policy. If such an event occurs after a year, it is treated as any other cause of death would be. Suicide within the 12 months of taking the insurance policy implies that the assured life had taken the policy as a pre-meditated measure and was intending to end their life all along. As such, suicide within a year of the date of the policy commencement is treated as an exclusion, and no benefit is payable in respect of conditions arising directly or indirectly as a consequence of such exclusions. Therefore, on the occurrence of such an event, the only claim entertained under the policy is for 80% of the premiums paid so far. In case the policy had been revived, if the life assured dies by suicide within one year from the revival date of the policy, the higher of, 80% of the premiums paid till the date of death and surrender value, will be payable as the death benefit.
The premium waiver benefit applicable in certain life insurance plans shall also cease to operate in the event of suicide within 12 months from the date of issuance of the first premium receipt, or date of revival.
As seen above, the exclusion for a claim in life insurance plans in the event of suicide comes with some conditions. This means that a claim under circumstances of suicide is not entirely elusive. When a beneficiary files a claim, the life insurance provider will require a death certificate before paying out the benefit. Such a certificate will indicate if the deceased died by suicide. Once the insurer is convinced of the conditions, and if the event happens after a year of taking the policy, the benefit will be paid out to the nominee of the deceased assured.
You just have to find out the suicide clause in your life insurance policy and look out for the fine print.