Reply #12: Life insurance policies cover suicide.

[girl gone mad]

Let's lay some groundwork here. While insurance companies hate to part with a buck if they don't have to, they concluded long ago it was bad for business if the public saw them as weasels who routinely tried to get out of honoring their commitments. To reassure potential customers that this wasn't the case, in the mid-to-late 1800s they developed the incontestability clause, which limits the amount of time the company gets to uncover and object to problems with statements made in the policyholder's application. Once the specified period is over the company generally has to honor the policy.

A related change had to do with how insurers dealt with suicide. It used to be that policies regularly contained an open-ended exclusion for suicide - if the insured offed himself, regardless of how long after purchasing coverage, the insurer didn't have to pay. But there are conflicting public-policy positions here: One, long espoused by insurance companies, is that it's wrong to create an economic incentive for suicide by paying off beneficiaries. The other, ultimately adopted by most courts and state legislatures, argues that it's wronger to tell the grieving family they won't be seeing any insurance money because their loved one chose to take his life. After much litigation, the suicide exclusion has now been limited in most cases to two years, research having indicated that such a period is long enough to weed out those who buy life insurance with the specific intention of killing themselves thereafter.

So: if someone does himself in more than two years after his life policy took effect, the insurer typically will pay. If the death takes place within two years of the start date, though, and the insurance company can prove it's suicide, not an accident - it's their exclusion, so the burden's on them - they'll usually return any premiums that were paid, but that's it.

http://www.straightdope.com/columns/read/2746/would-life-insurance-be-paid-out-on-someone-executed-for-a-crime