Term Life Insurance Articles
How Suicide Affects Term Life Insurance
2010-08-12
The basics of term life insurance are easy to understand. You pay a premium throughout the term of the insurance policy, and if you die at any time before the term is over, the insurance company will pay a pre-determined benefit to your beneficiaries. Most causes of death are covered under a term life insurance policy, including death by illness or disease, accidental death and death at the hands of another person (except when the other person is a beneficiary). However, when reviewing term life insurance quotes, it is important to remember that death by suicide will always be excluded from coverage. For term life insurance, suicide will nullify the insurance agreement and result in a denial of benefits.
If every policyholder of a term life insurance policy were to die before the end of the term, the insurance companies would go bankrupt trying to make all of the benefit pay-outs. This is why term life insurance is structured the way it is. Term life insurance is meant to be affordable and among the least expensive means of insuring your life against an unforeseen death. In order to keep the premiums as low as possible, the insurance companies must be able to depend on the fact that the vast majority of policyholders will reach the end of the term and still be alive. For the few who die prematurely, the collected premiums are then sufficient to make the benefit pay-outs.
At the core of this type of insurance is a risk assessment by the insurance companies. People who are considered to be at a lower risk of a premature death will be charged less for their insurance, people at a slightly higher risk will pay more, and people at the highest risk will either pay the highest rates or be denied coverage. This is the reason for all of the medical and lifestyle information gathered when you ask for term life insurance quotes. Suicide, however, is a risk that cannot be factored. No one knows why some people commit suicide and others do not. The answer lies solely within each individual, and there is no reliable way for insurance companies to make a risk assessment of the likelihood of suicide. Accordingly, for term life insurance, suicide will always be excluded from coverage.
Suicide also raises an issue of deception. If a person entered into a term life insurance agreement knowing that he or she was going to commit suicide after the policy became effective, the policy can be invalidated because the person's intent was to defraud the insurance company. Term life insurance is meant to cover unforeseen death, not a death that was specifically planned for the purposes of an insurance pay-out.
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The basics of term life insurance are easy to understand. You pay a premium throughout the term of the insurance policy, and if you die at any time before the term is over, the insurance company will pay a pre-determined benefit to your beneficiaries. Most causes of death are covered under a term life insurance policy, including death by illness or disease, accidental death and death at the hands of another person (except when the other person is a beneficiary). However, when reviewing term life insurance quotes, it is important to remember that death by suicide will always be excluded from coverage. For term life insurance, suicide will nullify the insurance agreement and result in a denial of benefits.
If every policyholder of a term life insurance policy were to die before the end of the term, the insurance companies would go bankrupt trying to make all of the benefit pay-outs. This is why term life insurance is structured the way it is. Term life insurance is meant to be affordable and among the least expensive means of insuring your life against an unforeseen death. In order to keep the premiums as low as possible, the insurance companies must be able to depend on the fact that the vast majority of policyholders will reach the end of the term and still be alive. For the few who die prematurely, the collected premiums are then sufficient to make the benefit pay-outs.
At the core of this type of insurance is a risk assessment by the insurance companies. People who are considered to be at a lower risk of a premature death will be charged less for their insurance, people at a slightly higher risk will pay more, and people at the highest risk will either pay the highest rates or be denied coverage. This is the reason for all of the medical and lifestyle information gathered when you ask for term life insurance quotes. Suicide, however, is a risk that cannot be factored. No one knows why some people commit suicide and others do not. The answer lies solely within each individual, and there is no reliable way for insurance companies to make a risk assessment of the likelihood of suicide. Accordingly, for term life insurance, suicide will always be excluded from coverage.
Suicide also raises an issue of deception. If a person entered into a term life insurance agreement knowing that he or she was going to commit suicide after the policy became effective, the policy can be invalidated because the person's intent was to defraud the insurance company. Term life insurance is meant to cover unforeseen death, not a death that was specifically planned for the purposes of an insurance pay-out.
