Suggesting that life insurance provides coverage for suicide may be slightly misleading. With a suicide exclusion clause, the beneficiary of someone who commits suicide would not be able to claim the death benefit at all. Without the suicide exclusion clause, the sum assured on the life of a suicide victim would generally be honoured after two years past the issue date. However, the opening statement gives the impression that insurers actually provide special provisions in the event of suicide. This is hardly the case. The death benefit would be paid in the absence of an exclusion clause and after two years.
A risk has to have many specific characteristics for it to be insurable. Death of the insured should occur by chance and also be reasonably unexpected. Suicide undermines these two characteristics of insurable risks. This is why any suicide committed within the first two years of the issue date of a policy, would result in a mere refund of accumulated premiums to the estate of the deceased or the beneficiary.
Not having an exclusionary clause for suicide, whatever the period, would lead to anti-selection. Anti-selection refers to the tendency of those with higher risk to seek insurance. The law is designed to prevent anti-selection and still protect the beneficiaries of those who commit suicide several years after acquiring a life insurance policy.
The double indemnity rider of life insurance policies cannot ever cover suicides. Even if the company pays the sum assured, the Accidental Death rider would not apply. This is by definition; suicide is intentional. Murder would be covered under this, once the act is committed by a party external to the insurance contract. Critical illness benefits and terminal bonuses would be paid someone who was terminally ill. In the event of suicide, any critical/ terminal illness benefits paid to the insured under the terms of contract would not be reneged.
Some insurers require information of mental disorders and a history of depression as part of medical underwriting. They do this where the insurance contract contains no exclusion clause relating to suicide. It is somewhat misleading to suggest that life insurance deliberately protects against the risk suicide. In the absence of an exclusionary clause, death by suicide after two years of the issue date of the policy would be covered. The provision that applies to suicide performs the same role as the incontestability clause. Insurers do not normally challenge claims made on life insurance after a two year period typically.