Can a life insurance company cancel a policy within the first two years of inception if suicide is suspected?
My friend has a term life insurance policy that is less than 2 years old. She entered the hospital recently for a newly diagnosed bipolar disorder and had admitted to thoughts of suicide. Within 2 months of her stay and diagnosis, her term life insurance policy was canceled by the insurance company for reasons of risk. Can they legally do this? I read the policy, but am unclear whether they have the right to do this. Thanks.
July 23rd, 2009 at 7:43 AM
Most Life Insurance contracts have a two year "contestable" period. Any suicide during the first two year period will result in a refund of the premiums paid and no death benefit paid. After the policy has been in force for two years, a death benefit will be paid even in cases of suicide.
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July 23rd, 2009 at 7:43 AM
yes,
read the policy exclusions again, they should have set out clear limitations for the first 24 months of the policy for the possibility of sucide, or death by some pre existing condition.
It sucks but that is how they do business.
July 23rd, 2009 at 7:43 AM
>"had admitted to thoughts of suicide."
Unfortunately, yes!
I was licensed in health and life insurance. Let me let you in on a secret, the insurance companies are thieves! They have the contracts worded in such a way that allows them certain maneuvering room. Also, they are smart enough to know that folks don’t have the resources to fight with them. In this case, it’s not cost effective!
Now, having said that, she might be entitled to have her premiums refunded.
They are always looking for ways to sell you insurance, and on the other side of the coin, mitigating their losses (not paying out).
Oh what a business!
July 23rd, 2009 at 7:43 AM
Yes - during the first two years, the policy is contestable - they have to return her premium, but can cancel it, especially if she has a psychiatric history she didn’t reveal on the application.
July 23rd, 2009 at 7:43 AM
Yes, the insurance company can cancel the policy if there is a change in risk within the first 2 years and if there has been misrepresentation of health condition. The insurance company will have to refund the premium paid.