Posts filed under 'suicide clause'
Like cancer and car accidents, there are probably very few of us who haven’t been touched by the loss of a relative or someone we know by suicide.
I try to address this sensitive issue a couple of times a year just because I believe a lot of life insurance claims go unpaid when the death is due to suicide, not because the company doesn’t want to pay them, but because claims aren’t filed.
To say there is a stigma that goes with the whole subject of suicide would be soft peddling the impact it has on the family and friends of the deceased. It’s often unexpected and always traumatic and very often produces feelings of guilt in a family that feels like they should have been able to keep it from happening.
It is the stigma, shame if you will, and the myriad of other feelings that often lead surviving spouses to either forget or just not file a life insurance claim. Mixed in with that most people don’t believe that insurance companies have to pay in the event of suicide, so why file?
But they do pay! There is a two year exclusion for death due to suicide, the suicide clause, in most states, one year in the others, and by law after that exclusion period the company has to pay.
But here’s the kicker. The companies don’t watch the obituaries and contact families when there’s a death. A claim has to be filed. If no claim is filed, no benefit is paid.
Bottom line. I just don’t want to see cases where a widow doesn’t get the life insurance proceeds that are due to her because she somehow believes it is owed or deserved. If you have a friend whose spouse commits suicide, bring the subject up. Help them out. File the claim!
March 10th, 2010
Winter kill, a term used to describe those wild animals that don’t survive an over harsh winter, or are old and/or weak from disease and succumb to the normal hardship of winter, holds a grip on my life also.
About this time of the year, every year, I really wonder if I’m going to survive to those wonderful spring days and even more wonderful days of summer that revive my body and soul. I’m not exactly sure what it is that would kill me. A fatal case of cold feet? Shivering to death? Shoveling snow?
I’ve heard of cabin fever and maybe what I have is a 21st century version of that. I can’t go out for a run in shorts and a t-shirt so I feel, not just the walls closing in, but even all the clothes a person has to wear just to survive. I start thinking crazy things. I mean go figure this recurring thought as I look up at one of the nearby peaks. “I wonder how long I would last up there if I was naked”?
Would my life insurance cover me if they found my naked body frozen to that peak in the spring? I feel confident it would. Even if they ruled it a suicide, I’m past the suicide clause in my life insurance policies. Although it would be a stretch to call it suicide since I would have to be either dropped out of an airplane or drug up that 14,000 ice cube kicking and screaming all the way. Far more likely a homicide.
And don’t get me started on that hideous joke on mankind called daylight savings. I get up and come to work early. That’ s tough in the winter when I wake up in the dark and for a month or so come to work before the sun comes up. But it’s the waking up part where the government mandated time change nearly kills me each spring. Just when I am starting to enjoy the fact that it is actually light, not sun up, but at least light when I wake up, they do it. They change the time and for about 3 weeks I am thrown back into waking up in the dark. It sucks. Every spring I threaten to move to Arizona where they don’t do that awful ritual.
Bottom line. My blog. My forum to occasionally share a little whine.
February 15th, 2010
I was recently interviewed by bankrate.com and MSNBC concerning some aspects of why life insurance companies might refuse to pay a death benefit. From the perspective of the consumer it seems there is a belief that companies really search for ways not to pay. In spite of big headline life insurance challenges like Heath Ledger and David Carradine, the truth is that life insurance companies would rather pay a death benefit than fight legal battles and get bowled over by bad press. There are a lot of times they pay when legally they really shouldn’t have to.
The article really focuses on on the two instances that trigger most of the questions of whether a company should pay or not. Those are the standard two year clauses in all insurance policies known as the suicide and incontestability clauses.
These two clauses simply put, allow a company to challenge payment of a claim if the insured commits suicide in the first two years of the policy, or if the insured is found to have materially misrepresented information pertinent to the company’s decision to issue the policy.
The suicide clause is pretty straight forward most of the time, although it has to be a clear cut case of suicide or the company will likely lean toward paying the claim. Shooting yourself would be an example of straightforward. A fatal car wreck might very well have been a successful suicide, but companies usually aren’t going to challenge this in most cases in the absence of some other evidence that would prove the person intended to kill themselves in a car wreck.
The larger contention usually lies with the incontestability clause. Was the person truthful and forthcoming in their application for life insurance? Was there an attempt to deceive and at least purposely leave out certain facts, material misrepresentation, that may have led to a company decision to decline an application or perhaps issue the policy at a different rate?
In the case of Heath Ledger there was the appearance that he may have run afoul of both clauses with his drug overdose death potentially being a suicide and the fact that he apparently denied drug use on his application. In spite of these two issues, while we’ll never know whether the full amount of the death benefit was paid, we do know that after a full investigation a death benefit was paid by the company.
Bottom line. When applying for life insurance always answer all questions exactly as they are asked and truthfully. You aren’t required to give them more information than they ask for and if that leaves some hole in their underwriting they can’t use that as a way to not pay a claim. As my friend and partner Rich Fuller with Special Risk Services noted in the article, don’t offer answers to questions that aren’t asked, so if they ask ‘Do you plan to be out of the country for more than four weeks,’ you really don’t want to tell them you’re going to Lebanon for three weeks. That’s not what the question is.”
July 28th, 2009
I did a series of posts last year on life insurance policies and have referred back to those posts on several occasions when explaining some specific clauses and options such as the suicide clause and incontestability clause and the conversion option.
Now I would like to start from the beginning and talk about the application. The application itself has been something of a sore point with some customers and for a few who are more concerned than the average person with identity theft, a cause for deciding against applying. I have actually had clients pull the plug completely on purchasing life insurance to protect their family because of questions about their social security number, their income and their net worth.
For the purposes of this subject I’ve chosen to use a West Coast Life insurance application mostly due to the simplicity of the document. west-coast-life-application Notice that they don’t beat around the bush with identity information. Coming out of the first line of the application they have your name, date of birth, social security and driver’s license numbers.
The social security number is right up there with the most frequent “Why do they need to know that?” questions I get. It’s not questioned that often, but probably 1 out of every 100 clients has some issue with it. There are really two reasons. The SSN is used to confirm identity on both the application and upon death. The other reason is that your death is an event that has to be reported to the IRS. Even though the death benefit is not income taxable to your beneficiary, the amount of the death benefit is added to the gross value of your estate for estate tax purposes unless it is owned by a life insurance trust. So, like it or not, if you want life insurance you’re going to have to share your social security number.
I get less grief over the driver’s license number, but the reason for the life insurance company having it is because most life insurance applications require a copy of your motor vehicle record. Most people never think about it, but the type of driver you are does have some impact on your mortality risk.
The application then moves into your occupation. While you do need to provide your employment information, I can honestly say that I haven’t heard that insurance companies necessarily verify your employment. But here is where two other questions come up that people aren’t that keen on sharing the answers to, income and net worth. “Why do they need to know that.” The need is less sinister than those who are concerned about might think. Income and/or net worth are determining factors in how much life insurance a company will underwrite on an individual. For non estate purposes, a multiple of income determines the max. For estate tax purposes, the amount of insurance is determined by the net worth minus the exemption times the tax rate. So, they don’t really care or necessarily check on how much you make, but the insurance companies do have some interest in not insuring someone who makes $20,000 a year for $2,000,000. That goes a bit beyond the whole replacement of income idea.
Next comes a synopsis of the type and amount of coverage being applied for followed by the beneficiary designations. It’s important to note that the application actually becomes part of the policy when approved and issued and the beneficiary designation in the application is actually the only place in the policy where the designation is noted.
This is followed by non medical history covering such things as foreign travel and whether or not you are a private pilot. After that is medical history. The application is kind of a synopsis in these areas. If there is more information needed in non medical history questionnaires are completed for things such as aviation, scuba diving or foreign travel. A more complete medical history is done during the exam.
And last on the list of information needed is a list of life insurance currently in force and whether you intend to replace it or not. This is another area where people get a little testy, thinking that it’s not the business of the company to know whether they are replacing anything or not. But keep in mind that it is the business of the company to know whether they are going to be a party to over insuring you. It is also the business of the company to be compliant with state laws and provide the appropriate forms for replacement.
Bottom line. There are a lot of personal questions on a life insurance application. It’s important to keep in mind that they have have valid, important reasons.
April 27th, 2009
It’s been a fascinating couple of years. I will sum it up by saying that we have helped a lot of people get life insurance who never thought they could. And what better way to celebrate the information we’ve shared and the victories we’ve had than with a shared meal, a key word salad.
Diabetes has been at the forefront of our life insurance efforts from the very start. We’ve made huge headway in finding aggressive underwriting for type 1 diabetes and type 2 diabetes. I think our strong point has been in education. There are a lot more people out there today that know what their A1c is than when we started.
I’ve been very clear about where some of the problems lie in our industry. The AARP/New York Life collaboration, on what can only be described as a sick crime against older folks, continue to offer the worst term insurance and whole life insurance in the business. They are simply not the advocate they claim to be.
I’ve stepped on some toes along the way. Selectquote and Zander Life insurance have taken exception to some of my observations. Being a Dave Ramsey fan and I think, ultimately, a reasonable person, I did apologize to Zander. In spite of Selectquote’s berating commentary, I still stand by my assertion that they are biased in what companies they offer (otherwise they wouldn’t be so easy to beat) and I still believe that Suze Orman should go back to waitressing. As to their assertion that I only use Selectquote and Suze Orman for search engine optimization, well, I don’t, even though they think I do. If I didn’t think there was better service elsewhere and more honest advertising, I would never have mentioned Selectquote.
We’ve touched on scuba diving and Prudential being a leader in great rates for recreational divers. Pru also stomps the competition on prostate cancer, sleep apnea and mild anxiety issues. While providing direction on those issues we have also been able to provide direction for those involved in skydiving and foreign travel to places where kidnap and ransom insurance is more than just a casual thought.
We’ve stayed abreast of the economic meltdown and recession that have whacked us all and tried to help people understand how best to handle their life insurance needs in these tight times.
We’ve held lengthy discussions about obesity and the impact it can have on other health issues such as hypertension or high blood pressure, cholesterol, heart disease, heart attack, stroke and cancer. We’ve discussed the risk and benefits of gastric bypass surgery as a means to avoid the life threatening side effects of being over weight.
Probably our biggest response has been from those suffering from depression and bipolar disorder. We reached a group of people that have truly been black balled in the insurance industry and we’ve been able to find some level headed underwriting and hit some major home runs for those who have the name tag but lead normal lives.
We have bared the facts behind the black eye of all black eyes in the insurance industry, the non guaranteed whole life, universal life and variable universal life policies and explained the alternatives in the permanent insurance market. There is nothing that provides greater value and peace of mind than a rock solid guarantee.
We’ve had frank discussions about business life insurance such as key man insurance and buy/sell life insurance. We did a whole series on women and life insurance. We’ve provided direction and information to private pilots that they aren’t getting anywhere else. We’ve talked about the guts of the policy when it comes to the two year suicide and incontestability clause and the accelerated death benefit and the beneficiary rights and the beneficiary issues for those who aren’t in a legal relationship such as a gay couple or an unmarried couple.
Bottom line. And the list goes on and on. We’ve tried to leave no stone unturned and no question unanswered in our quest to find life insurance for those whose mortality risk might be more challenging than average. As an independent agent it has been gratifying to have so many ways to help those who have been mishandled by the wrong agent or the wrong company. As we continue to reach out my prayer is that all who need help find it, and that more agents consider serving those who are harder to help.
March 18th, 2009
I’ve often been told that life insurance has an out with people with severe depression or severe bipolar disorder because they’ve got that suicide clause thing. I’ve written about this before and I think life insurance companies would probably prefer I leave it alone, but it’s a subject that needs clarification.
In virtually every traditional life insurance policy in our country there is a two year suicide clause. Simply put, for the first two years of the policy the company does not have to pay a death benefit it death is due to suicide.
The language from one of my own policies states, “The benefits payable are limited if the insured commits suicide, while sane or insane, within two years from the issue date. In such case, out liability will be limited to a refund of the premiums paid to us”.
This is important. I was reading the other day about a dramatic increase in suicide rates during the great depression and an already increasing rate around the world because of our current recession. I am certainly not advocating suicide, but the family left behind needs to know that just because it was suicide doesn’t mean they won’t get the life insurance due to them.
I suspect whether due to ignorance about the suicide clause and what it really says, or out of a misplaced sense of shame, plenty of legitimate claims are never filed. The company isn’t going to track you down. In fact from their end it will probably just appear as though a policy lapsed. Even if the policy lapses, if it was in force at the time of death it is a legitimate claim.
The suicide clause lasts for two years because that’s the law. Regulators didn’t want to see a situation where someone had paid into a policy for a long time, or even more than two years, and had a catastrophic life event that ended in suicide and leave the family penniless.
Bottom line. I hope this helps even one person to file a legitimate claim that would have otherwise gone unpaid.
March 4th, 2009
If asked, most people would say that life insurance doesn’t cover death due to suicide and they would certainly have logic on their side. After all, what sense does it make that someone can buy large amounts of life insurance for pennies on the death benefit dollar, do themselves in, and their family still receives the money. Doesn’t sound like a sound business model to me.
But, with the exception of the two year suicide clause, that is exactly what will happen. The protection for the insurance companies lies in the fact that they most certainly don’t have to pay if someone takes out a policy and immediately goes out and takes their life. They also have in their favor that it is highly unlikely that a person will take out a policy with suicidal intentions and have the mental stability to wait it out for two years. So, for the first two years there is no benefit payable for suicide. During that period the company would return the premium paid, but nothing else.
The reason I bring this whole subject up is that the misconception can lead to families not even filing a claim if a loved one commits suicide. Their gut, as I mentioned, tells them that the claim would logically not be paid, so why even file it? Sometimes they drag their feet because they don’t think it will be paid and the policy will lapse.
Virtually all policies have the same clause, controlled by state law. A typical policy would have this wording: “Suicide. The benefits payable are limited if the insured commits suicide, while sane or insane, within two years of the issue date. In such case our liability will be limited to a return of all premiums paid to us.”
Bottom line. How often do we hear of a middle age breadwinner who for whatever reason, takes their life? If they had life insurance in force, the family should file a claim right away. If they just aren’t sure, they should call the company or consult an agent or an attorney to review the policy.
August 21st, 2008
