Thursday, June 07, 2012

Is Suicide Covered by Life Insurance?

I had a discussion this week after a tired badminton session with few friends of mine and surprisingly they do not aware that suicide is insured as well by insurance. So, I just share it here with you guys.

As far as I know, suicide is covered by your life insurance. However it is only valid after 1 year you buy your insurance. This basically means that if you suicide within a year, you're not insured! lol :) Having said so, some insurance policies may vary (e.g. 2 years), so you need to check with your insurance agent or read the policy carefully.

Why it is not covered within a year? 

I guess you already know the answer. This is to avoid people misused the original intention of insurance.Why 1 year? I guess that is due to statistical reason which usually people won't plan their suicide more than a year. So now you know the loophole. If you want to get the money, plan your suicide 1 year in advance. If many people are doing what you're doing, then guess what? The insurance company will then increases suicide clause from 1 year to 2 years. It is all about statistic for a insurance company so technically they will never lost! :)

Any other exception?

The only one thing is not covered by life insurance is death due to natural disaster (e.g earthquake) unless you buy specific insurance which is meant for natural disasters. 

I also brought a very interesting hypothetical example during the discussion: while you suicide during the earthquake, are you being covered? I do not really sure but common sense tell me the answer is Yes and No. Yes, if the earthquake do not cause a lot of death and No, if the earthquake is the serious one.  I imagine that if the earthquake causes a lot of death, can we still able to tell whether your death is caused by suicide? Unlikely right?

P/S: I hope you do not really want to plan for your suicide in 1-year advance. :)


Kris said...

Hmm.. I never knew about that. It seems to be a huge disadvantage to the insurance company. After 1 year , the total premium collected is still so little (some high percentage goes to the agent), and the insured person commits suicide.

Seems a sure 100% lose clause for the insurance company.

ChampDog said...

It is unlikely 100% lost clause for a insurance company because they're now still making money. I think the key thing is very little of us will plan to do that. It is probably less than 1%?

Probably also after a year, psychologically you don't feel like want to suicide anymore although you originally plan for it?

If that really happens, they can just change their suicide clause.

Chris from said...

Suicide during an earthquake? LOL. What could possibly be the chances of someone doing that? Anyways, most policies have a 2-year suicide clause.

ChampDog said...

Ya, not a practical example. :) Unlikely for such coincident.

I think in Malaysia, most policies just have 1-year suicide clause.

ocrandom said...

I didnt know that! I didnt even know insurance cover death by suicide to begin with. I always thought it's exempted. Hmm...I think it is possible to plan ahead..just like the 10K bet? :P lolx

ChampDog said...

Yes, it is covered and it is stated in the policy or you can go to the great eastern website and refer to the FAQ section , I think they mentioned about the suicide clause there.

I'm not sure if they can get the evidence that you actually plan for it and do not allow you to claim. Technically, I think they can do that but how can they get the evidence?

So if you really plan for it, just make sure you don't leave out any evidence (e.g. write it in your diary)! lol! :)

SustainableSuzy said...

Suicide is covered but not death by natural disaster? That strikes me as odd. It seems like every other way of death can be manipulated into profit except for natural disasters.

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