Every year, more than 8,000,00 people commit suicide around the world and 17% of them are from India. The cases of suicide in India are also increasing every year, which has pushed our country among the top 12 countries with maximum number of suicide cases per year. The major reasons for suicide in India are family problems, depression, illness and marital issues and many more.
Dealing with such unexpected event is very difficult for the family, which suffers the emotional trauma and pain due to the loss of the family member. Losing the only financial security in the form of life insurance due to exclusion of suicide in the policy increases the difficulties of the family.
Life insurance companies are in the business to make a profit and that’s why they elude most of the avoidable risks related to life by adding exclusion clauses which makes the policy void in many circumstances. The regulator IRDAI has made changes in the suicide clause which got applicable from 1st January 2014. So all the policies which are issued before 1st January 2014 will have the old clause of suicide while the new suicide clause will be applicable to the policies issued after 1st January 2014. So let us understand the suicide clause in both cases.
For the policies issued before 1st January 2014
The suicide clause for all the policies issued before 1st January 2014 states
“If the life assured commits suicide within one year from the date of commencement of risk or date of revival if revived, whether sane or insane at that time, the policy will be void and no claim will be payable.”
So if the policyholder commits suicide before 12 months of the commencement of the policy, then no any claim will be paid by the company and the insurance policy will become void. While if the policyholder commits suicide after one year of the commencement of the policy, then the death benefit will be paid. Some of the companies have a waiting period of even 2 years for such claims. It is important to look at the terms and conditions of the policy.
For the policies issued after 1st January 2014
As per new guidelines, there are changes in the suicide clause which is applicable to policies issued after 1st January 2014 basis the type of insurance plan.
Market Linked Life Insurance plans- In case of linked plans, if the policyholder commits suicide even within 12 months from the commencement of the policy during the policy term, then the nominee is entitled to receive 100% of the policy fund value.
Non-Linked/Traditional Life Insurance Plans- In case of non-linked plans, the nominee is entitled to receive 80% of the premium paid in case of death claim due to suicide even within 12 months from the commencement of the policy during the policy term.
Now let’s see what are the terms and conditions of a suicide clause in the case of third party and group insurance policy
In case a policyholder has taken a loan against his policy and he commits suicide during the policy term, then the interest of the third party (housing company or bank) is protected by the insurer by repaying the loan. But it is applicable only if the notice of assignment of the policy has been received by the insurer, one month before the date of death.
Let us understand this with an example: Mr. Sharma took a home loan of Rs. 15 lakh against his life insurance policy of Rs. 20 Lakhs. Later, during the policy term, Mr. Sharma committed suicide due to his family problems, but the burden of unpaid home loan didn’t pass to the dependent’s of Mr. Sharma as the insurer repaid the home loan according to the suicide clause of the life insurance policy and the information of the assignment of the policy was received by the insurer before the date of death.
Group Insurance Policy
In group insurance policies, the organization, employer or entity which decides the type of insurance to purchase for the group members is known as the master policy holder and the members of the group who are covered under the policy are known as Member of the policy or Group Insured. So in group insurance policy, the master policyholder is the actual policyholder, not the individuals in the group and that’s why no claim is accepted by the insurer in case of death due to suicide in a group insurance policy.
Things to Remember
- If any misleading information has been provided by the policyholder, then the policy will be cancelled in case of claim made due to death by suicide
- If the claim for death by suicide is made during the grace period, then the payable sum assured will be paid after deducting the outstanding premium
- If a lapsed policy is renewed and the policyholder commits suicide within 12 months from the date of issue, then the claim will be rejected.
Suicide is the most cowardly act of life. People might be thinking of ending their pain, but they forget about the suffering of their loved ones. Getting a suicide claim paid under a life insurance policy is still payable at the discretion of life insurance company’s guidelines where the chances of claim rejection is very high.