Ben Nguyen 
Mental health issues have become increasingly prevalent in Canada, with recent statistics from Canadian Mental Health Association indicating that 1 in 5 Canadians will personally experience a mental health problem in any given year. With growing awareness around mental health, many Canadians are concerned about how conditions like anxiety, depression or suicidal thoughts could impact their life insurance coverage.
Our article here will provide an overview of how life insurance policies handle claims in cases of suicide, including details on suicide clauses, how mental health affects your application, and what options are available if you are denied coverage.
We will examine this sensitive topic factually and compassionately, equipping you with the knowledge to make informed decisions about protecting your loved ones.
Does Life Insurance Cover Suicide?
Most individual life insurance policies contain a suicide clause specifying that suicide is not covered for the first two years after the policy begins. If the insured individual dies by suicide during this initial two-year period, referred to as the “suicide clause period”, the insurance company will generally not pay out the full death benefit to beneficiaries.
Instead, the life insurance company will typically refund all premiums paid to date, excluding any interest accrued. Some insurers may deduct fees before returning premiums.
After the suicide clause period ends, a life insurance policy will generally pay out the full death benefit to beneficiaries even in cases of suicide, as with any other covered cause of death. However, it’s important to carefully check your policy, as some insurers reserve the right to refund premiums paid only after the initial waiting period.
For group life insurance policies, like those provided by an employer, coverage of suicide depends on the specific policy terms. Some group plans may pay out for suicide, while others refund premiums or provide no benefit at all.
What is a Suicide Clause?
A suicide clause is a standard provision in most Canadian individual life insurance contracts specifying that the insurer will not pay the full death benefit if the insured individual dies by suicide within a defined period after the policy takes effect, usually two years.
The purpose of a suicide clause is to discourage people from taking out policies with the express intention of dying by suicide shortly thereafter. It protects the insurance company from potentially fraudulent claims made to receive a substantial payout while having paid only minimal premiums.
While the suicide clause duration varies by insurer and contract, two years is the standard across most insurance providers in Canada, such as Manulife, TD Insurance, and others.
How Does Suicide Affect Life Insurance Claims?
If suicide occurs within the suicide clause period, typically the first two years, the life insurance company will investigate the circumstances before deciding on the claim. Rather than paying the full death benefit, the insurer will most often refund all premiums paid to date, excluding interest and dividends accrued.
Some insurers like Desjardins and Empire Life state they will refund premiums paid or the cash value built up in the policy. Others may deduct fees before refunding premiums.
In the case that suicide occurs after the suicide clause period ends, the insurance provider will usually pay the claim and the full death benefit amount to the designated beneficiaries. However, the insurer may still investigate the circumstances around the death to rule out fraud or intentional misrepresentation.
For a jointly-held last-to-die policy, a suicide death of one insured during the clause period does not impact the surviving policyholder’s coverage. With a joint first-to-die policy, the insurer may alter the contract to a last-to-die policy after a suicide claim and recalculate premiums.
What If Suicide Occurs Within the Clause Period?
If the insured individual dies by suicide within the suicide clause period, typically, only the premiums paid to date will be reimbursed to beneficiaries, not the full death benefit amount. Some insurers may deduct surrender fees or other costs before refunding premiums paid.
Any additional insurance benefits, like accidental death or critical illness riders, would not be paid by the insurer in the event of a suicide death during the clause’s waiting period. Only the base premium amount would be refunded.
Rules and reimbursement procedures can vary between insurance companies and individual policies. The suicide clause is not intended as an incentive to commit suicide after the period expires. Its purpose is to provide some financial protection to beneficiaries during a difficult time while protecting insurers from potential fraud from the recently insured.
How Do Insurance Companies Determine if a Death Was Suicide?
When a life insurance policyholder passes away under circumstances that might suggest suicide, the insurance company conducts an investigation to determine the cause of death. This investigation is particularly thorough if the death occurs during the suicide clause period.
Insurance companies typically examine:
- Police reports
- Autopsy reports
- Medical records
- Witness statements
- The policyholder’s recent history
This investigation helps the insurer determine whether the suicide clause applies to the claim. If the death is ruled a suicide and occurs during the suicide clause period, the company will typically deny the full death benefit.
What Should I Do If My Life Insurance Claim Is Denied?
If a life insurance claim is denied because of suicide, there are 4 steps you can take to address the situation. While this can be a tough time, understanding your options is important.
Step 1: Review the policy
Before taking any action, thoroughly review the deceased person’s life insurance policy and understand the terms, particularly regarding the suicide clause and exclusions.
Step 2: Contact the insurance company
If you believe the claim was denied in error, contact the insurer and ask for an explanation of their decision. Your life insurance broker can assist with this process. Sometimes, providing additional information can lead to a review of the claim.
Step 3: Consider hiring a lawyer
If you’re unable to resolve the issue directly with the insurer, consider seeking legal assistance from an attorney who specializes in life insurance claims. They can help you understand your legal rights and options.
Step 4: File a formal complaint
You can file a complaint with the regulatory body in your province, such as the Financial Services Commission of Ontario (FSCO). These organizations regulate insurance companies and can help resolve disputes between policyholders and insurers.
Remember that a claim denial isn’t a reflection of the worth or value of your loved one. It’s a result of the policy terms and the insurance company’s interpretation of those terms.
Can I Get Life Insurance If I Have a Mental Illness?
Yes, it is possible to obtain life insurance if you have a mental health condition like anxiety, depression or bipolar disorder. However, your condition may impact your eligibility for coverage, lead to higher premiums, or require additional application scrutiny.
When applying, it’s important to disclose any mental health disorders and provide information on the diagnosis date, symptoms, hospitalizations, treatment plans, and current stability of the condition. Insurers will request access to your medical records and may require an independent doctor to examine them.
If your illness is mild and well-managed, you may qualify for standard rates. More severe or recent diagnoses often lead to higher premiums or difficulty getting coverage. Each insurer has unique underwriting policies, so comparing quotes from multiple providers is wise if the applicant is initially denied.
How Does Mental Illness Affect Life Insurance?
Mental health conditions like depression, anxiety, bipolar disorder or schizophrenia are considered high-risk for life insurance underwriting. Applications from individuals with these disorders often go through a more rigorous underwriting process.
Factors that may increase premiums or the risk rating include:
- Severity of the diagnosis
- Presence of multiple mental health conditions
- Frequency of episodes or hospitalizations
- Any history of suicide attempts
- Extent to which symptoms disrupt daily living
- Adherence to the treatment plan
- Use of alcohol or drugs to self-medicate
Insurers will thoroughly review medical records and require an independent exam to assess risk. An applicant’s cooperation with treatment and a stable condition can improve outcomes. Even with a mental health history, coverage is possible with the right life insurance partner.
The table below indicates factors that may impact life insurance eligibility:
| Low Risk | Medium Risk | High Risk |
| Mild depression | Suicide ideation | Prior suicide attempts |
| Short-term anxiety treatment | Addiction treatment | Recent hospitalization |
| Single episode major depression | PTSD | Schizophrenia |
| Stable bipolar | Borderline personality disorder | Eating disorders |
The bottom line
Suicide and mental health concerns create understandable uncertainty around life insurance eligibility and claims. While special considerations exist, coverage options are still available with the appropriate disclosures and the right life insurance partner.
To recap, most life insurance policies contain a suicide clause restricting payouts for suicide deaths within two years. Afterward, claims follow standard procedures. Mental health disorders frequently require additional scrutiny, but do not prohibit coverage. If denied, guaranteed issue life insurance can provide an option.
FAQs
How does suicide affect life insurance policies in Canada?
Most life insurance policies in Canada contain a suicide clause, which states that suicide is not covered within the first two years of the policy. If suicide occurs during this period, the insurer will typically only refund premiums paid, not the full death benefit. After two years, policies normally pay out for suicide like any other cause of death.
What is considered suicide by a life insurance company?
Insurance companies investigate all causes of death to determine if it was suicide. This includes instances of intentional overdose, asphyxiation, gunshot wounds, and trauma consistent with self-harm. Medical examiner and police reports are reviewed. Medically assisted death may be considered separately.
Can my life insurance deny a payout if I die by suicide?
Insurers can deny a full payout if you die by suicide within the first two years of the policy, as per the suicide clause. After two years, most will honor a claim, but some policies expressly deny suicide deaths anytime. Carefully review your policy language.
Where can I find the suicide clause in my life insurance policy?
The suicide clause will be outlined in the policy's terms and conditions or in the section on exclusions or limitations of liability. This important section notes restrictions on coverage and causes of death that are not payable by the insurer.
When does the suicide clause period start for life insurance?
The suicide clause takes effect on the start date of the life insurance policy, not the date you signed up. Most clauses last for two years from the policy effective date. This means suicide is not covered as a cause of death for the first two years you are insured.
Can I get life insurance if I have depression or mental illness?
Yes, life insurance is possible if you have depression, anxiety, bipolar disorder or other mental health conditions. Disclose your diagnosis upfront as concealment can void a policy. Your condition may lead to higher premiums or additional application requirements.
