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Life Insurance and Suicide- An Analysis of Legal Position

There is no legal concept of life insurance, although it has been defined as an insurance scheme in which the insured decides to pay certain sums referred to as premiums for a predetermined term and the insurer have promised to pay certain amounts of money on certain terms and in a specified manner on the occurrence of a particular incident, based on the duration of human life.

Purpose and Object of Life Insurance

A ‘life insurance policy’ is a legal contract and has prescribed terms and conditions of the contract. Specific exclusions are written in the contract to limit the liability of the insurer.

The main purpose and object of the assured in taking policies from life assurance firms is to safeguard the interest of his dependents, that is, wife, children, and parents because within the event of premature death of the assured as a result of the happening in any contingency. A life assurance policy is additionally accepted as security for even a commercial loan.

A life insurance policy is a contract between the policyholder (protected) and the insurer (insurer) where the insurer promises to pay the sum of money to the designated beneficiary upon the death of the insured person. In return, the policyholder undertakes to pay the balance of the premium every month.

Key Features of Life Insurance Policy

(a) A contract referring to human life.

(b) Provides for the payment of the lump sum payment.

(c) The balance shall be collected after the expiry of a certain term or after the death of the insured person.

Definition of Suicide in Law

Suicide is a deliberate and intentional act on the part of the self-destroyer. This includes some act of self-destruction. Historically, suicide was known as the Latin phrase “Felo De Se” or the English word “Felonia De Se” and is used to describe those who attempted to commit suicide.

The Athenians would “punish” the self-murderer by cutting off his hand or, more specifically, by cutting off the body of the self-murderer. The dominant opinion at the time was well summed up by Plato (427–347 B.C.), who wrote: “He is a prisoner who has no right to open the door to his prison and to run. He should wait and not take his own life before he is called by God.”

In India, suicide is not a crime. Suicide attempts are punishable under Section 309 of Indian Penal Code, while suicide attempts are punishable under Section 306 of Indian Penal Code. The committal of suicide itself is not and cannot be considered an offence in India.

A life insurance policy is typically taken by someone to ensure that their family stays financially stable after the policyholder dies. But what happens when the policyholder commits suicide? Will the policy beneficiary be guaranteed the sum?

All this depends on the policy terms. Commonly, it may not be included in the initial years, but suicide is typically covered 12 months from the date of purchase of the policy. In such a case, during the policy period (after 12 months of issue), the policy will pay the family (whoever is the nominee) the death benefit (the sum assured) if the policyholder commits suicide.

What is excluded from Life Insurance Policy?

  1. Suicide: Insurance providers will not generally pay the death penalty if the covered person committed suicide within two years of the policy is released. Most insurers can have suicide coverage from the second-year forward, according to terms and conditions, from the date of purchase of the policy. Beneficiaries can, however, collect a refund of the premiums paid. Suicidal death insurance cannot be sought by the employer of the policyholder if the policyholder is covered under the life insurance policy of the group. In the case of a group life insurance scheme, suicide is not protected because these plans have a term of one year and the suicide exclusion provision is typically covered by a life insurance policy at the expiration of one year.
  2. Dangerous Action: Death from engaging in an adventure or dangerous activity shall not be protected through term insurance. Example-the rock climbing. These practices pose a danger to the safety of the policyholder and can lead to fatal accidents. Participation in such events must be reported when the policy is in effect. Failure to do so is deemed to be a material misstatement and the insurer is not obligated to comply with the claim.
  3. Illegal Acts: When death happens while indulging in criminal conduct, the insurance. The provider will not pay the death benefit. Example-consumption of illicit drugs, died in a car accident while accelerating, or not wearing a seat belt in a state where it is lawful to wear a seat belt.
  4. Aviation: Insurance agencies do not pay a death benefit if a person dies in a private aircraft crash, but insurance would pay a death benefit if death occurs in a commercial aircraft crash.
  5. Murder of the Policyholder: If the beneficiary is a criminal- the insurer will not pay if the policyholder is killed and the inquiry shows that the beneficiary has been implicated in the murder. Pay can only be made if the murder charges were dismissed or acquitted. The insurer shall suspend reimbursement forever until the matter has been settled in favor of the beneficiary.
  6. Death Happens Under the Influence of Alcohol: If the death of the policyholder is attributable to the influence of alcohol or narcotics, the insurer will reject the claim. While using the life insurance policy if the policyholder has not revealed these practices, the insurer will withdraw the death benefit.
  7. Not Disclosing the Habit of Smoking: Smokers will have a higher degree of health risk and insurers will apply an extra amount to the premium. Failure to report smoking habits may hinder the process of the claim if death was due to smoking-related complications.
  8. Death Due to Pre-Existing Health Conditions: Death attributable to any illness that occurred when the term insurance policy was already in effect would not be settled by the insured. A variety of other causes of death that are not covered by a regular insurance policy.
  9. Maternity Related Death: If the death of the policyholder is due to pregnancy complications or miscarriage or during childbirth, the insurer will not have compensated the value of the premium to the nominee.
  10. Death Due to Natural Disaster: When the policyholder dies as a result of a natural catastrophe such as an earthquake or a tornado, the beneficiary will not get the claim.
  11. Lapsed Policy: If the policy has lapsed and the policyholder commits suicide within 12 months of the renewal of the policy, the insurer may reject the claim.
  12. Wrong or Misleading Information: If false or misleading evidence is submitted to the insured by the policyholder at the time of the signing of the contract that will lead to the cancellation of the claim.
  13. Death of Beneficiary/Nominee: Nomination is a vital aspect of insurance coverage, and nominations are ensured in nearly all plans. Highly unlikely, but there may be a situation where the candidate may die before payment is triggered by the policy. In a case such as this, the legitimate beneficiaries of the policyholder are entitled to receive the gain under the policy.
  14. War: If the insured has died as a result of a military act or other war-related activity, the death insurance will not be paid for related acts.

Life Insurance and Suicide Clause

The Insurance Regulatory and Development Authority of India (IRDAI) is a legislative body constituted under the Act of Parliament, i.e. the Insurance Regulatory and Development Authority Act, 1999 (IRDAI Act 1999) for the overall regulation and development of the insurance sector in India.

The increase in suicide rates since 1990 had compelled the IRDAI to amend the suicide clauses for life insurance policies for term policies issued before 1 January 2014, the nominee is not entitled to any death benefit in case of the insured’s death caused due to suicide.

Term policies issued from 1 January 2014 provide suicide death cover to the insured’s family subject to the following terms and conditions:

  • If the insured’s death is caused by suicide then the nominee is eligible to be paid the full sum assured or the death benefit as per the policy clauses.
  • The coverage of suicidal death after one year was to prevent insurance frauds where an individual stuck in financial debt would want to take undue advantage of buying a term policy and then commit suicide for his family to claim the death benefit.
  • Insurers assumed that this one-year duration would be sufficient enough to discourage policyholders from taking such extreme decisions for the sake of money.
  • if the policyholder commits suicide within 12 months from the date of the planned revival, only 80 percent of the premiums paid shall be payable as a death benefit to the nominee.
  • For traditional life insurance plans, nominees will receive 80% of the amount of premium paid for death due to suicide within one year from the start of the

The President promulgated the Insurance Laws (Amendment) Ordinance, 2014 on December 26, 2014. The Ordinance amends the Insurance Act, 1938 (the Act), the General Insurance Business (Nationalization) Act, 1972, and the Insurance Regulatory and Development Authority (IRDA) Act, 1999.

Conclusion

A suicide clause in life policies that involves suicide “Felo De Se” not only legalizes the act of taking one’s own life but is also contrary to public policy in India.

Carrying out suicide plans in cases of deliberate self-destruction would in a sense encourage commercially organized suicide. Several of these media events have not drawn the attention of Indian lawmakers and policymakers. Living in hardship, tens of thousands of hungry Indians killed themselves last year, mainly because of unpaid debt. That was to change the supporting framework of microfinance firms.

But it is very difficult for the investigation authorities, as well as the prosecutors, to determine such stuff since no one is aggrieved by the case to put the case before the court and the police. Since the legitimate agents and beneficiaries of the insured themselves would profit from the circumstance and establish that such things would go against their interests.

The premise that real-life law legalizes suicide arrangements in the case of intentional death is that no one can wait for a prescribed time of one or two years and then commit suicide in no way justifies the act. On the contrary, if a person finds himself in a position of financial hardship in the middle of his / her life, he/she should choose to kill himself/herself for the sake of his / her beloved family rather than live in poverty with them.

The suicide clause contained in life insurance plans in India is close to that of other insurance providers in various parts of the world. This means reimbursement or refund of the insurance to the recipient if the claimant attempts suicide during the specified span of one to two years, as provided for under the contract if the insured kills the insured with a stable state of mind.

The practice of offering survivors and borrowers the benefits of life insurance schemes in the case of intentional suicides for welfare benefits is not only contrary to public policy in India but would also lead to a spike in economically planned suicides. The values and the dignity of the people would degenerate against the economic needs of the few.

Although insurance is not a significant cause of suicide, it is also in distress, knowing that mortality is a financial opportunity for their families and can offer extra inspiration.

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Written by Advocate Neha Chopra

Neha Chopra is an advocate and pursuing Master in Business and corporate law from Symbiosis Law School. She feels, "as much we read in today's time is less compared to the fast pace the world is moving with". She is here to share her thoughts, knowledge, opinions, and all that you can incorporate from her writings.

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