Suicidal Insurance: Is suicide insurable?

Death is an inevitable choice but what if the means to it is self-chosen in the form of suicide. Did you know that the most proclaimed act of cowardice-suicide is covered under the life insurance policy by majority of the insurance companies. Life insurance policies are primarily taken to serve as a financial cushion for the dependents of the deceased. Death can knock on any door without prior notice leaving the dependents financially crippled. Suicide is a grave problem that may be caused and aggravated by many factors varying from individual’s age, gender, race, circumstances, etc. The most dominant causes for suicide can be broadly categorized as under: financial (indebtedness, unemployment, bankruptcy, sudden fall in economic status, etc), societal (dowry, rape illegitimate pregnancy, etc), psychological (failure in exam, family problems, love affair, fall in social status, etc), health (chronic disease, mental disorder, stress, depression, drug addiction, etc.)

Amidst corona pandemic induced lockdown, there has been a sudden spike in the number of suicide cases in India. The Google Trends data suggests that stress levels in India has skyrocketed during the lockdown, with search levels for stress and therapies for battling it exceeding that of several other countries which were under lockdown over the past few weeks. With 17.8% of the global population, India accounts for 36.6% of the global suicide deaths among women and 24.3% among men. According to a report by WHO, suicides represent 1.8% of the total global burden of disease and the number of attempted suicides are 20 times more than completed suicides.

“Suicide is like a pebble in a pond. The waves ripple forward.” Suicide brings along with it thunders of depression, guilt, anger and stigma on the family members left behind. Being an unexpected event, it sometimes devastates the financial stability of the other family members, especially when the person committing suicide is the sole bread earner for the family. Evidently, a recent report reveals that financial crisis/loss has been a triggering factor leading to suicides in India and automatically the majority of such financial burden falls on the dependents left behind.

What comes as a helping hand for the protection of the bereaved family is the insurance company, which provides the dependents the benefits of the life insurance policy in case undertaken by the victim when he was alive, subjected to certain terms and conditions. Suicides are generally covered by insurance companies so as to provide financial support to the emotionally devastated family. At such point of family crisis, any financial support is welcome. The year 2014 is a landmark year as far as the suicidal clause in life insurance policy is concerned.

Before 2014 in India, if the person insured (policyholder) committed suicide within a year of the commencement of the policy, whether or not the person sane at the time, the policy would automatically be treated as void and no claim shall be paid to the nominees. The idea behind this provision was to avoid insurance fraud. Suicide is a moral hazard risk to the insurance company as there could be chances where the policyholder was in deep debt and bought a life insurance policy to pay them off with the sum assured. It is assumed that the 12 months would be enough for such a person to come out of that mindset. Any suicide committed after 12 months of taking the policy was duly entitled to receive the benefits.

However, the Insurance Regulatory Authority of India reformed its guidelines in the year 2014. Now, in case of market-linked life insurance policies like ULIP (Unit Linked Insurance Plan), the policyholder is entitled to receive 100 percent of the policy fund value on committing suicide within 12 months from the purchase of the policy. Whereas in case of traditional insurance, if the policyholder commits suicide before 12 months, the nominee shall be entitled to at least 80 percent of the premiums paid, provided the policy is in force.

Certain situations where nominee may not get insurance claim in case of suicide are:

1. If a lapsed policy is revived and after that, if the policyholder commits suicide within 12 months from the date of policy revival, then insurer can reject your claim.

2. Any wrong or misleading information given by the policyholder (at the time of signing contract) to the insurer will lead to cancellation of the claim.

3. The nomination is a critical part of taking insurance and in almost all policies, nomination is ensured but there can be a scenario where the nominee may die before the payment under the policy triggers. In situation like that the legal heirs of the policyholder are eligible to get the benefit under the policy.

4. One cannot claim suicidal death cover from the policyholder's employer in case the policyholder was insured under group life insurance policy. In a group life insurance policy, the suicide is not covered because these policies have the tenure of one year and suicide exclusion clause is usually covered under the life insurance policies after the completion of one year.

It is crucial to note that the discretion of paying claims lies in the hand of insurer. It is possible that if one commits suicide and the insurer rejects the death benefit claim made by the nominee, say on grounds of concealment of material facts. Hence, it is vital to search for better sustainable solutions to the existing problems and think twice of the beloved ones before taking an irreversible leap in the way of suicide.

Overall, it is imperative for a civilised society to ponder that why does it take a heart attack to realize that cholesterol levels were high, a brain hemorrhage to diagnose the existence of high blood pressure and a suicide to realize that depression, sadness and mental distress are real issues at hand. Suicide is an open challenge to the collective wisdom and prudence of the society. India has the highest suicide rates in the world and what life insurance does is a little good for the grieving family. It lacks far behind attaining SDG3 which calls for reducing the suicide mortality rate on a priority basis.

Reducing social isolation, treating mental disorders and preventing social disintegration can be a three-way formula for combating the disease of suicide. Let's pledge not to bestow every failed struggle with problems with a badge after a life is lost and an attempted but failed suicide with a trophy of surviving through it. Let’s resolve to insure ourselves against the plague of suicidal thoughts injected in our minds by paying small and collective premiums of positivity, openness, awareness, vigilance, courtesy and gain tremendous fruits of well being for the nation.

By Anjali Lalchandani