Suicide & LIfe Insurance Claim

Life insurers are wary of being used by a person considering suicide to leave a legacy for their loved ones in the form of a life insurance payout. As a result, most insurers won't pay out for deaths caused by self-harm in the 13 months after the policy is issued.

Similarly, if someone increases their cover and then kills themselves, the insurer may pay out the amount the person was originally covered for, but not the increase.

But there's a second, less commonly recognised side to insurance and suicide: the large number of people who try to kill themselves, but survive the attempt, and later go on to take out insurance.

When people take out insurance, failing to reveal past suicide attempts is likely to lead to insurers refusing to pay claims should the policyholder die, or fall sick. Some cases through the years have found their way before the Insurance and Financial Services Ombudsman.

NON-DISCLOSURE OF SUICIDE ATTEMPTS
In 2011 a woman took out life and mortgage protection insurance. She died of natural causes in 2013. The insurer found she had not disclosed an attempted suicide by overdose of prescription pills in 2010. The insurer told the Ombudsman it would have charged triple the premium had it known the woman's full medical history.Despite that, the insurer made a voluntary payment of just over $50,000 to her estate. It would have been in its rights to pay nothing.

2013: In January 2012 a woman took out trauma insurance, but failed to tell the insurer about an attempted suicide. When she made a claim for cancer in 2013, it was declined.
The ombudsman found the insurer had a legal right to do so.

CLAIMS AFTER SUICIDE
2009: It is not always clear if someone has deliberately killed themselves, which is why insurers' policy wordings exclude death caused by self-inflicted injury in the first 13 months of a policy.
That means that if a person dies from something like a drugs overdose, where it is not clear if they intended to kill themselves, the insurer can decline a claim.

In one case a man took out life insurance in March 2009, and died of self-inflicted morphine intoxication in December the same year. The dead man's estate did not believe he intended to kill himself, but the wording of the policy meant the insurer did not have to prove he did, just that he died as a result of self-inflicted injury.

2004: A couple cancelled their life insurance with an insurer, and less than a week later, took out new policies with the same insurer. The insurance adviser knew of this plan, but failed to tell the insurer it was "replacement" business, on which the 13-week suicide exclusion should have been waved.
When one of the couple committed suicide, the insurer declined the claim. The ombudsman ruled it had to pay up.

2003: When a man died after swallowing medication, his insurer refused to pay a life insurance claim relying on policy wording which said no suicide would be covered in the first 13 months of the policy, whether the man was sane or insane. The coroner was unable to determine whether the man had intended to kill himself, or had even realised that taking the medication would kill him. Without proof of intention, the insurer had to pay the claim.

2004: The husband of a woman who killed herself found her insurer refusing to pay the claim because she had not disclosed she had once taken the antidepressant Prozac. It was a material non-disclosure, and the insurer was within its rights not to pay, even though the 13-week suicide exclusion period had passed.

CLAIMS AFTER A SUICIDE ATTEMPT
2010: A woman driving her car collided with a power pole. Her insurer believed it to be a suicide attempt, and not an accident, and so declined her claim. A psychiatrist found the woman was incapable of forming an intent to take her own life as she was suffering from a depressive illness with some psychotic features. The ombudsman found the woman could not therefore have committed a "reckless" act, as the insurer alleged, which meant it had to pay the claim.

2008: In another case a woman who crashed on a motorway the same day as the bank she worked for discovered she was stealing from customer accounts, had her car insurance claim turned down by an insurer, suspecting she had intended to kill herself. It said her driving was "reckless, grossly careless, or grossly negligent". The ombudsman's investigation found expert evidence did not indicate the woman perceived the risk of her actions, and the insurer had to pay up.