Wednesday, April 22, 2009 Death of Freddie Mac CFO may be suicideIf your loved one commits suicide can the family still collect on life insurance? Most insurance companies have a suicide clause, which states that they will NOT pay if you commit suicide within two years of getting your policy.
Life insurance is regulated by the various states, not by the federal government. It is deemed to be contrary to public interest to encourage suicide by making insurance proceeds available to those who see no way out of their financial difficulties. So insurance companies usually prohibit claims when suicide is the cause of death... they consider that the contract is void and refund premiums to the owner of the policy (who usually died along with the insured).
Insurance companies' actuarial tables, upon which they base their premiums, exclude suicides, so to expect companies to pay up for suicide prevents them from pricing policies correctly, and allows the public to avoid paying higher prices because of such selfish acts. State insurance law limits the period of this exclusion, so that if a person was sufficiently rational when they took out the policy, they are not penalized if later on they become despondent.
Usually, this suicide exclusion allows insurance companies to void contracts if suicide occurs within two years of the policy date. It's considered that this will sufficiently discourage someone from initiating a policy with the intent to later commit suicide. The rare person who can maintain their determination to die can in fact deliver money upon their death to their beneficiaries. |