Life insurance

Suicide and incontestability

One of the features of life insurance is that the benefit may be payable even if the cause of claim was a deliberate act of the policyholder. This arises from the underlying reason for life insurance, which originally was primarily to make provision for dependants, rather than to benefit the policyholder personally.

Nowadays, certain safeguards against taking out life insurance with suicide in mind are catered for, and it is very common for Life Insurance Policies to provide that if the policyholder commits suicide within a certain period from the start of the policy, the death benefits are excluded totally or limited to a refund of the premiums paid. It is important to pay heed to the terms and conditions contained in your Life Insurance Policy.

In some cases, disputes over the validity of an insurance contract may arise with an alleged breach of utmost good faith, due to certain material facts having been omitted or misrepresented during the underwriting process. Policyholders should check whether there is an Incontestability clause under the policy. The Incontestability provision states that, except for fraud and while the policy is in force, the insurer cannot normally dispute the validity of the contract after it has been in force during the lifetime of the policyholder for a certain period of time: e.g. two years. In some cases, the Incontestability provision will not apply to a misstatement of age, sex or smoking habit of the policyholder.

The Incontestability provision often serves as an effective shield against an insurer’s attempt to repudiate liability on the basis of breach of the duty of utmost good faith.