Does a Term Insurance Plan Cover Suicide?

Term insurance is one of the most well-known and sought-after insurance products available in the market today. Buying a term plan should be the first thing in your financial portfolio. No one knows what the future holds. Therefore, it is advisable to invest in term plans. If you wish to get a clear idea about what is a term plan, read on.

Does a Term Insurance Plan Cover Suicide.
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A term plan is a type of life insurance policy that provides  coverage to the policyholder for a particular period. In case of the policyholder’s death within the tenure of the plan, the insurer pays the sum assured to the nominee of the policy.

Term plans have the cheapest premium among all forms of life insurance policies. Besides this, they provide the highest sum assured that can help you secure your family’s financial future. While buying a term plan you can seek the help of a term insurance plan calculator to compare the various features and select the policy that suits your needs.

Many people are skeptical about the question that whether a term life insurance plan covers suicides. Initially, this plan did not cover suicide. However, the rising cases of suicide in the country made the Insurance Regulatory and Development Authority of India (IRDAI) amend this clause from January 1, 2014. It means that the nominees of the policy will not get the benefits in case the policyholder’s demise happens due to suicide if the policy was issued before January 1, 2014. Only new policies issued after January 1, 2014, will pay the benefits to the nominees under certain conditions.

Term insurance – new clause

The first condition under the new clause is that the suicidal death benefit will only be given to the nominees if the term life insurance of the policyholder was issued for a tenure of one year, or was active for a year after renewal. The insurer will reject any claim if the policy period is lesser than a year. The reason to put such a clause is to restrict frauds.

It can happen that the insured who is stuck neck-deep in debts will commit suicide so that his or her family can live a financially independent life by claiming the death benefit. The purpose of keeping a clause of 12 months is to stop the policyholders from taking such a drastic step due to temporary monetary problems.

If the policyholder commits suicide within a one-year duration, the nominees will not receive the complete life coverage amount. Here, the insurer will only pay the death benefit, which is a certain percentage of the premiums paid until death.

Exclusions of suicide cover under the new clause

The insurer can deny the claim of the policyholder’s family if:

  • The policy gets lapsed without the paid-up value being realized
  • The nominee dies before he or she receives the death benefits; in such cases, the legal heir can claim the death benefit
  • The policyholder has given false information while filling the application form

To sum it up

A person who commits suicide is weak, and it indicates that he or she does not have the willpower to overcome challenges and start life afresh. He or she does not think about how the family will cope with his or her loss.

Many policyholders think that by committing suicide their family will at least be able to lead an economically stable life. They should remember that the death benefits can be lost or will be given in proportion to the premiums paid to date as per the insurer’s guidelines. It will be extremely hard for the family to digest your loss as well as the rejection of the claim. Therefore, fight your problems, and spend some quality time with your loved ones who always care for you.

Interesting related article: “What is Life Insurance?”