The Pitfalls of Suicide Insurance Claims

Insurance Companies are profit driven so, in the event of suicide, many pitfalls could affect payouts to beneficiaries. Here we will have a look at Suicide Insurance claims.

In true “who dunnit?” fashion, insurance companies treat claims from beneficiaries of suicide victims with scepticism and, in some cases, refuse payouts.

Examples of exclusion clauses include:

  • A 24 month waiting period
  • A Contestability clause



The 24 Month Clause – Suicide Insurance

Suicide InsuranceIf a policyholder commits suicide within the first two years of the contract, so the insurance company will not pay out the death benefit lump sum.

Instead, beneficiaries will only receive the monthly premium amounts paid into the policy.

The Contestability Clause 

This clause protects insurance companies from claims involving suspicious deaths.

Like a “who dunnit?” novel, insurance companies will refuse payouts if they suspect foul play on the part of beneficiary claims.

So to put it bluntly, if an insurance company suspects that a beneficiary is involved with the death of the policyholder to instigate an insurance claim, death benefit payouts will be dismissed out of hand.

Risk Profiles

Insurance companies try to avoid financial losses by thoroughly investigating the risk profile of applicants for life cover.

It is an industry standard to establish risk profiles that could lead to suicide.

These could include general mental health issues such as:

  • Depression
  • Loss of employment
  • Spiraling debt
  • Recent family deaths


These issues are suicide triggers.

It is not unknown for applicants to obtain life cover as a last ditch solution to providing financial support for their families before taking their lives.

Other Exclusions – Suicide Insurance

Lump sum benefits will not be paid out in the event of death by drug or alcohol abuse or dangerous and risky activities such as scuba diving and speed related sports.

So there are two different kinds of exclusions:

Outright Exclusion

This clause defines the circumstances under which the lump sum benefits of life cover will not be paid.

Underwriting Exclusion

Underwriters award life cover at their discretion.

In some cases, they will impose higher monthly premiums to ensure that they will still make a profit at the end of the term of the insurance policy or in the event of lump sum benefit claims by beneficiaries.

Exclusions also apply to any annual increases in lump sum payout benefits.

Beware the Fine Print

Also, many policyholders request an annual increase in the lump sum benefit payout of their policies.

However, what many consumers are oblivious to is the fact that each time a policy value is increased, so is the 24-month exclusion clause!

Using an Annual 10% Increase Formula

First 12 months – R1 million cover

  • Second Year– original R1 million plus R100 000 = R1.1 million life cover
  • Third Year– original R1 million suicide exclusion clause lapses R100 000 from the second year remains. Life cover increases with another R110 000 = R1.21 million life cover
  • The Fourth Year– Policyholder commits suicide before the end of the fourth year policy anniversary. They will only pay out R1 million of the R1.21 million.


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All info was correct at time of publishing