The common beliefs about how suicide and life insurance intersect are ill-informed, at best.
First, there's the trope of a down-on-their-luck protagonist thinking their family would be better off if they committed suicide, if only for the policy benefits. Then there's the idea that this scheme used to work, but insurance companies have gotten wise and suicide invalidates a claim.
An insurance policy isn't unlike any other contract; the devil is in the details-specific clauses and provisions. Some policies may have a clause that excludes suicide, others may pay out benefits regardless of suicide, and others still "will have provisions that, if the insured commits suicide within the first two years, there won't be payment," DeBofsky says.
It all depends on the language of the policy, and, even more, the law states that said language must be plain, clear, and conspicuous. Such grey areas in the law can lead to litigation and come down to a judge's interpretation.
"Most insurance policies that people buy directly from insurance brokers have a provision that would invalidate a life insurance claim based on suicide during the first two years of coverage," DeBofsky adds. "But if the policy has been in effect for more than two years, if the insured commits suicide, the likelihood is the coverage would remain in effect and the benefits paid."
Incontestability is a common debate in these cases. It's a policy clause that allows the insurer to argue that the policyholder provided inaccurate information. If they can prove that, it would void the contract. This provision, however, is typically only valid for a specified period of time.
"All policies nationwide contain an incontestability provision that says, within the first two years, an insurer can scrutinize the application," DeBofsky says. "If there's an omission or misrepresentation about prior health history, that could invalidate the coverage. After the policy has been in effect for two years, any statement made in the application can only defeat coverage if the statement was made fraudulently, which is 'knowingly and with intent to deceive.' If there's something really glaring that you leave out-say, a blood test that shows you had HIV, and there's a question about HIV testing results, and you fill in 'none,' then that would probably be considered fraudulent. But if there's a minor finding on an X-ray or blood test and the doctor says, 'Don't worry about it, it's probably an artifact,' and you omit that to find out, three years later, it was significant, that probably wouldn't be fraudulent."
DeBofsky has handled several cases where there is a question whether a death was accidental. The burden, in these cases, is on the insurer to prove that it was not an accident. These debates will often hinge on the facts and circumstances of the case-crime scene analysis, depositions of loved ones, etc. "There's a legal presumption against suicide, and certainly if there's no note, then it probably wasn't suicide," DeBofsky adds.
According to the American Council of Life Insurers, 99 percent of life insurance claims are paid in full. However, that doesn't mean some of them didn't encounter denials, appeals, and legal fights that delay payment. You don't have to look far to find examples.
A famous one from 2011 involved a Montana man who was battling cancer when he died in a car accident. Shortly after, his life insurance claim was denied when the company argued it was suicide.
DeBofsky has another: "We're always fighting over if there was an accident or not," he says. "We litigate a lot of those claims. For instance, I just filed one where the insured died after crashing a truck into a tree. They did a toxicology postmortem, and he was two-and-a-half times over the legal limit for alcohol. But we were able to develop evidence that the truck had defective brakes and steering, so alcohol probably wasn't a factor. It was a rural area on a dark night where the road takes a sharp turn."
There is one area in the law that has yet to be fully explored, he notes: "States like California, Oregon and Washington now have assisted suicide laws, so if you have been diagnosed with a terminal medical condition and don't want to suffer to the very end, you can go to a doctor who will assist you in committing suicide. I have yet to see a reported decision on this, so I don't know if an insurance company would take the position that it would fall under a suicide exclusion or not."
That said, DeBofsky doubts that an insurance company would deny a claim for two reasons:
- The death is more due to the underlying medical condition
- It would be a PR nightmare
Every case depends on your specific circumstances and policy. Insurance attorneys deal with this regularly, and it's always a good idea to seek reputable counsel in the event that a claim is denied.