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Does Term Insurance Cover Suicidal Death?

Mr Anand Kumar is an IT professional who took a home loan of Rs 20 lakh against the term insurance cover of Rs 1 Crore. Within the policy term, i.e., 12 months after the issuance of the term life insurance plan term, due to depression, Mr Kumar committed suicide. However, the liability for the loan wasn't passed on to Mr Kumar's dependents. Instead, the term insurance company repaid the home as per the clause of suicide within the term policy, as the insurer received this information on the assignment policy before the demise date of Mr Kumar.

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Why Should Term Insurance Cover Suicidal Death?

Suicide is one of the most common causes of demise between age groups of 15 years to 29 years and 15 years to 39 years. The suicide rate in India has risen to 12.4 per 1,00,000 people, the highest ever recorded in India. As per the National Crime Records Bureau (NCRB) report released in April 2024, 1,71,000 people in India died by suicide in 2022. The common reasons behind suicide could be mental illness, lifestyle ailments, and financial debts, so forth.

The Insurance Regulatory and Development Authority of India has amended the clauses of suicide for the term insurance plan that was bought after 2014. In the term insurance policies that were issued before 2014 January 01, the nominee will not receive any death benefit in case the insured passes away due to suicide.

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Does Term Insurance Cover Suicidal Death?

Yes, term insurance covers suicidal death, provided the policyholder doesn’t commit suicide within 12 months of buying the term plan. People who understand what is term insurance and its benefits know that term plans today cover death due to suicide, but only in certain conditions. This plan helps financially and emotionally disturbed life-assured families by paying back some of the premium. But it all depends on the T&Cs of the plan. Term plans, which are issued from the date 1st January 2014, provide suicidal death coverage to the family of assured subject to the T&Cs. Check out the best term insurance plan in India and choose one that suits your requirements.

Let’s understand this with the help of an example:
Rupa’s husband, a 35 year-old man, bought a term insurance cover of Rs 1 Crore to secure his wife (Rupa). Within the policy term, i.e., after 12 months of buying the term life insurance plan, Rupa’s husband unfortunately committed suicide due to depression.
In this case, you must be thinking if Rupa will be provided the death benefit.
The answer is Yes. Since Rupa’s husband committed suicide after 12 months of months of buying the term plan, Rupa (the nominee) will receive the death benefit upon claim intimation.

Did You Buy the Term Life Insurance Policy Before January 01, 2014?

A term life insurance plan not only covers suicide but also helps the life assured’s emotionally distraught family financially simply by paying back some amount of the premium. This also depends upon the terms and conditions mentioned in the policy. The term plans that were issued from January 01, 2014, do provide a suicide death cover to the family of the policyholder that is subjected to the listed below terms and conditions:

The suicidal death cover of a term life insurance plan is only applicable if the policy has been issued for 12 months or twelve months after the revival. In case the policyholder passes away due to suicide within the above-mentioned situations, the nominee will be paid the complete sum assured or, as per the policy clause, receive the death benefit. The coverage of suicidal demise after a year was simply to prevent insurance frauds wherein any individual stuck in debt of finances will take an undue benefit of buying the term insurance policy and then will commit suicide so that the family can claim the death benefit. The insurance companies assume that a one-year time frame would be enough to discourage the policyholders and prevent them from making such an extreme choice due to the financial crisis.
The above-mentioned clause for the term life insurance plan has been relaxed to cover suicide demises occurring with the term policy issuance of 12 months or the policy revival. In case the policyholder commits suicide within this frame of 12 months of the issuance of a policy or the revival the nominee will not receive complete death benefits, however, the term insurance company will pay a benefit to the nominee that equal to a specific percentage of the paid premium by the policyholder during the policy term.

* You can calculate the premiums applicable for the suitable term plan cover using the term plan calculator available online.

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What are the Exclusions of Suicide Cover in the Term Insurance Plan?

There are certain exclusions to coverage of suicide within a term life insurance plan. The term insurance company might reject the claim under the following circumstances:

If the policyholder passes away within 12 months of the policy being issued or the revival, then the nominee will receive a specific percentage of the plan premiums the policyholder pays. It is important that the term life insurance plan is active and the age of the policyholder at revival or entry is eight years and above.
If the policy term of the term or life insurance policy has lapsed without the paid-up value being realized, then no claim will be paid to the nominee when the policyholder commits suicide.
In case the nominee passes away before, the proceeds of the term life insurance plan are payable to them upon the suicide of the policyholder. The legal heir will be eligible to receive the death benefit.
In case any concealed or misleading information is given to the insurance company by the policyholder at the time of policy enrollment, it will lead to the rejection of a claim by the nominee.

Wrapping it Up

Suicide is never the right decision, and it shows an individual’s inability to fight against the odds. Live for the well-being and sake of your loved ones no matter what. If a policyholder believes that a term policy can alleviate all financial concerns for their family in the event of suicide, it's crucial to remember that the payment of the death benefit is subject to the insurance company's guidelines, increasing the risk of claim rejection. In the end, the personal loss coupled with the potential denial of a term policy claim forms a harsh blow that their family may find difficult to endure.

FAQs

Q: Does term insurance cover suicidal deaths?

Ans: Term insurance is a financial tool that helps individuals secure the future of their loved ones in the event of their unfortunate death. While term insurance usually covers deaths due to most causes, including suicide, there are certain conditions attached to it. Death due to suicide is covered only after the completion of 1st policy year. Until then, if the policyholder commits suicide, only 80-90% of the premiums paid are returned to the nominee.
Q: Is term insurance cover suicidal death?

Ans: Term insurance cover in suicidal death refers to the amount of the benefit payable to the nominee of the policy in case of the policyholder’s untimely death due to suicide. Death due to suicide is covered in term insurance, but if the death occurs within the 1st year of policy purchase or revival, only 80-90% of the premiums paid will be payable, whereas if the death occurs after the 1st year, the entire sum assured will be payable as per the T&Cs of the policy.
Q: Can you receive death benefit due to policyholder’s suicide if your policy was bought before 2014?

Ans: No, you will not receive death benefit due to policyholder’s suicide if your policy was bought before 2014. The rise in suicide rates since 1990 likely led the Insurance Regulatory Development Authority of India (IRDAI) to change the suicide clauses in life insurance policies bought after 2014. For term policies issued before January 1, 2014, the nominee is not entitled to any death benefit if the insured dies by suicide.
Q: What is the suicide rate of India?

Ans: In India, the suicide rate has risen to 12.4 per 100,000 people, the highest ever recorded in India.
Q: Will Term Insurance Pay Death Benefit for Suicide?

Ans: Yes, term insurance provides death benefit to policyholder’s nominees if he/she commits suicide but not if the suicide was committed in the first 12 months of the policy issuance.