Do critical illness or income protection policies cover suicides?

Published 30 May 2017

Suicide is always a sensitive topic to discuss, but recent figures from the Australian Bureau of Statistics show that deaths from intentional self-harm reached 10-year highs two years ago.

Sadly, suicide is now the 13th leading cause of death in Australia, with nearly 13 people out of every 100,000 ending their own life in 2015. This compared with approximately 10 people per 100,000 in 2006.

The unexpected death of a loved one is a traumatic experience, and the emotional distress is often worse when a family faces financial problems as a result of losing someone.

But do critical illness and income protection insurance pay out when the policyholder commits suicide? Let's take a closer look at what these policies are and whether you would be eligible to make a claim.

Understanding your policy

Critical illness and income protection policies are designed to provide you with a financial safety net in the event that you become seriously unwell and unable to work.

Specifically, critical illness insurance pays out a lump sum benefit if you are diagnosed with or suffer from a major health scare, such as cancer, heart attacks or kidney disease.

Income protection, meanwhile, provides funds to you or your family in case of an illness or injury. Instead of a lump sum, you will receive a monthly proportion of your salary, which is usually set at approximately 75 per cent.

You may have critical illness and income protection insurance, enabling you to make a claim on both policies at the same time if you meet the eligibility criteria.

However, there are exclusions on policies that could prevent you or your loved ones successfully pursuing a claim.

Making a claim for suicide

Unfortunately, most types of critical illness and income protection cover include suicide and self-harm as exemptions, meaning providers will not pay out if the policyholder takes their own life.

Some insurers may allow suicide claims, although most policies usually include a clause that says the person cannot die from self-inflicted injuries within a specific timeframe. For example, policies may state that at least one year must pass between when the insurance is first taken out and the policyholder's death.

Even in these circumstances, an insurer may reject a claim if it believes a pre-existing mental health condition was withheld when the policy was agreed.

Nevertheless, you should contact an experienced lawyer who can talk you through your options if you're unsure about making a claim on critical illness or income protection insurance.

Please contact Gerard Malouf & Partners Superannuation Lawyers for more information.

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