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How Suicide Is Covered By Term Life Insurance Policies

2010-12-22

Suicide can be devastating for family members of the bereaved, and it can leave a family's finances shattered. The exception to the latter is when term life insurance coverage was purchased before the suicide occurs. Life insurance coverage can provide an immense amount of financial comfort and support for a family, but as suicide is a very special condition, it's very important to know how suicide coverage works on a term life insurance policy and the potential limitations of this coverage.

First of all, most contracts have suicide clauses that specifically detail the suicide coverage provided in a term life insurance policy. This is done to protect the insurance companies from cases in which a person would buy an insurance contract just before committing suicide, resulting in a large loss to the insurance provider without any gains. If insurance providers paid out these sorts of claims, they would quickly lose a tremendous amount of money and would have trouble staying in business. Many insurance companies used to put suicide under the exclusions section of their policies and refuse to pay death benefits to the families of policy holders who took their own lives; however, most modern insurance contracts contain a suicide clause which specifies that death payouts will not occur within a given amount of time (usually two years) at the beginning of a contract. After that period of time, death benefits will be paid out for suicides.

This means, of course, that suicide coverage is very limited for the first few months or years of term life insurance coverage. However, family members of a policy holder may still be able to receive some payout from the insurance provider. Many suicide clauses also stipulate that the premiums paid into a policy will be returned in the event of a suicide. While this amount pales in comparison to death benefits, it can still be a very significant amount of money and provides another form of protection for the families of term life insurance policy holders.

Both policy holders and their close family members should understand how suicide benefits work on a term life insurance policy. Even if the policy holder has no history of depression or other serious emotional disorders, understanding the way that a term life insurance policy works can be extremely beneficial in understanding the policy as a whole and the way that benefits are paid out. Policy holders with any questions about their term life insurance coverage should contact agents or read online for more information, especially where suicide coverage and other special payout situations are concerned. This can lead to a better policy and a better understanding of the mechanisms of term insurance.

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