Life Insurance and Suicide in Canada

The unfortunate truths about suicide and life insurance in Canada

11 Minute read

Originally published: December 5 , 2022

Life Insurance and Suicide in Canada

The unfortunate truths about suicide and life insurance in Canada

11 Minute read

Originally published: December 5, 2022

Life Insurance and Suicide in Canada

Welcome to our Guide to Retiring allowance in Canada! It can be difficult to leave a job, and even worse, to lose your job. There are often some financial plans that you need to make when you are leaving your job voluntarily or involuntarily. Planning for retirement allowance comes first, followed by alternatives for pension plans, salary continuation, and employment benefits. In this article, we’ll talk about how to plan for your retirement allowance after you leave a job. Our blog will cover unique tax laws outlined in Canada that can lead to tax deductions, what a retiring allowance is, eligible retiring allowance, and the transfer of a retiring allowance.

Suicide in Canada

Suicide is an unfortunate reality that is much more prevalent than we wish to acknowledge in Canada. Many people unfortunately suffer with mental health issues and this is a very real issue that affects a lot of Canadians. With mental health issues becoming more prevalent in Canada throughout the years, there are lots who unfortunately feel like suicide is the only way to cope with their issues even though there are various services out there for everyone. We encourage everyone who has any issues with mental health to go seek professional help.

Does Life Insurance Cover Suicide?

Sometimes clients do ask us, “does life insurance cover suicide?” It really usually depends on the policy that you have, but generally, life insurance policies do not cover deaths by suicide, at least not during the first two years of the policy. This is because suicide is considered a pre-existing condition and is therefore not covered by most policies. However, after a certain amount of time has passed, usually one or two years, the policy may cover deaths by suicide. It’s important to read the fine print of your life insurance policy to understand what is and is not covered. There are also many other factors that come into play as well such as their mental health during the time of writing the policy, if the policy holder was covered with an individual life insurance policy or a group policy, and more. 

How Does Suicide Affect a Life Insurance Policy or Claim?

Since most life insurance policies do not cover deaths by suicide during the first two years of the policy. This means that if the policyholder dies by suicide within the 2 year time frame, the beneficiary of the policy may not be able to receive the death benefit.

However, after the first two years have passed, the policy may cover suicides, depending on the terms of the policy. If the policy does cover suicides, the beneficiary can still receive the death benefit, but they may have to go through a more complicated claims process.

In some cases, the insurer may pay out a partial claim to the policyholder’s beneficiaries, but this is uncommon. Additionally, the insurer may investigate the circumstances of the suicide to determine if the policyholder deliberately misled the insurer when applying for the policy. If the insurer finds that the policyholder misled them, they may deny the claim in full. There are also some circumstances where the beneficiary might just get the money back from the premiums that the policyholder has paid instead of receiving the lump-sum life insurance payout. 

What is a Suicide Clause in Life Insurance Policies?

A suicide clause is a provision in a life insurance policy that specifies whether the policy will cover deaths by suicide. As I mentioned earlier, most life insurance policies do not cover suicides during the first two years of the policy, so the suicide clause will typically specify this exclusion. This clause will also mention whether the beneficiary will receive the full payout or just get back the money the policyholder paid for the premiums in the case that the policy holders death is by suicide. This clause is an important part of the life insurance policy, specific terms of a suicide clause can vary depending on the insurance company and the policy, so it’s important to carefully read the fine print of your policy to understand what is and is not covered. 

We highly recommend that you speak to a life insurance broker if you are someone who has mental health issues but would like to get a life insurance policy. A life insurance broker can clearly explain what the clauses and conditions of your life insurance policy are. 

Can I Get Life Insurance With a Mental Illness?

Yes, it is possible to get life insurance with a mental illness. However, it’s important to keep in mind that having a mental illness can affect the cost and availability of life insurance. People with mental illnesses may have to pay higher premiums for life insurance, and some insurance companies may be unwilling to provide coverage to people with certain types of mental illnesses.

If you have a mental illness and you’re interested in getting life insurance, it’s a good idea to talk to our insurance agents who specialize in providing coverage to people with mental illnesses. They can help you understand your options and find a policy that meets your needs. It’s also a good idea to disclose any mental health conditions you have when applying for life insurance, as failing to disclose this information can result in your policy being denied or cancelled.

Can I get life insurance if I have a mental illness, yes you can get life insurance if you have a mental health condition or a mental illness

How Can Mental Illness Affect Life Insurance?

When applying for life insurance, your mental health diagnosis may be classified as either a mental health condition or a mental illness, depending on the severity of the condition. If this is the case, you may experience extended application processes and higher premiums. It is important to provide accurate information about your mental health condition to ensure that you are getting the most suitable coverage for your needs.

At the beginning of the life insurance application process, you will be asked a variety of questions regarding your diagnosis. These questions may vary depending on the company, but they generally include: 

  • When you were diagnosed
  • The severity of your diagnosis
  • The symptoms that affect your daily life
  • Your treatment plan and progress
  • The frequency of your episodes
  • Your hospitalization record 

You will also need to provide documentation and doctor evaluations of your medical history. Depending on the information in your file, you may be asked to undergo medical examinations to evaluate your mental health.

Life insurance mental health 3 factors that may increase the risk to insure

Does Life Insurance Give a Payout in the Event of Suicide?

Not always, as we mentioned earlier it really depends on your policy and the clauses on your policy regarding suicide. There are some life insurance policies that will provide a full payout to the beneficiaries of a policyholder if they have had the policy for over 2 years. There are some life insurance policies which will completely deny giving beneficiaries a payout if the policyholder passes away due to suicide, because the life insurance company might need to do a thorough investigation about the circumstances of the suicide. There is also a chance that a beneficiary will only get the amount that the policyholder has paid so far for the life insurance policy instead of getting a full payout. This being said it is crucial that you look into your life insurance policy and you find out what the suicide clause is as well as other clauses and conditions of your life insurance policy. If you need help to look into these clauses, or if you need help finding out what life insurance company is right for you, contact our team of life insurance brokers to help you find the right life insurance for you. 

Can I Be Denied Life Insurance Due to Mental Health Issues?

Yes, it is possible to be denied life insurance due to mental health issues. Life insurance companies use a variety of factors to determine whether to provide coverage and what premium to charge, and one of these factors is an applicant’s mental health. People with mental health conditions may be considered higher-risk by some insurance companies, and as a result, they may be denied coverage or offered coverage at a higher premium.

However, it’s important to keep in mind that not all insurance companies have the same underwriting standards, and some may be more willing to provide coverage to people with mental health conditions. If you have a mental health condition and you’re denied coverage by one insurance company, it’s a good idea to shop around and compare quotes from multiple companies to see if you can find more affordable coverage.

What To Do If You Are Denied Life Insurance 

There is always a possibility of being denied life insurance based on many factors including your mental illness and much more. This being said, there are great alternatives if you are someone who has been denied life insurance so check out these two alternatives which you should apply to if you have been denied life insurance: 

Simplified Issue Life Insurance

Simplified life insurance is a great option for those with moderate mental illnesses who don’t need to go through a medical exam. Instead, they only need to answer a few basic medical questions in order to qualify for the policy. This is similar to a guaranteed issue policy, which does not require a medical exam, but it is more affordable and offers much larger coverage amounts. 

Guaranteed Issue Life Insurance 

Individuals who may be ineligible for traditional life insurance due to certain medical conditions or age restrictions can still obtain life insurance coverage with a guaranteed issue policy. These policies come at a higher premium than traditional term life insurance, and the coverage is usually limited to around $50,000. However, the application process is less rigorous, and no medical exam or medical questions are required. Guaranteed issue life insurance is a great option for those with severe or untreated illnesses, or who have been hospitalized for self-harm or panic attacks. 

Find out more reasons why you might have been denied life insurance in this blog! 

Will a Group Policy Cover Suicide?

A group life insurance policy is a type of policy that is purchased by an employer and covers a group of employees. If one of the employees covered by the group policy dies by suicide, the policy may or may not pay out the death benefit, depending on the terms of the policy.

Most life insurance policies have a suicide clause that specifies whether the policy will cover deaths by suicide, so if an employee covered by the group policy dies by suicide, their beneficiary may not be able to receive the death benefit, or could get a only the money returned from the premiums paid, but other group policies might fully pay out the beneficiaries in the case of the policyholder committing suicide. 

What to Know About Life Insurance and Suicide 

Suicide is a grim reality that affects far too many families in Canada. To recap our blog on Life Insurance and Suicide in Canada, there are some important things to know if you are someone who is at risk of committing suicide or know someone who is, and want to get a life insurance policy: 

  • You can get a guaranteed life issue or simplified life insurance policy if you are someone who has a mental illness 
  • If a policyholder commits suicide, then the beneficiary might be paid out fully if the suicide occurred 2 years after the policy was in affect. Keep in mind that in some cases the beneficiary could be denied a pay out if there needs to be an investigation into the suicide, and in some cases the beneficiary might only get paid what the policyholder paid for the premiums. 
  • Some life insurance policies do have a suicide clause which will contain the rules and conditions surrounding the life insurance policy payout in the event of suicide
  • A life insurance broker can help you find the right life insurance policy for your mental illness 
  • There are several factors that well affect your life insurance coverage which is based on your mental health severity 

Need help finding the right life insurance for you? 

Even if you are obtaining treatment for a mental illness, you can find affordable life insurance in any situation. You can enlist the help of an agent for free to find the best life insurance for you and your needs. 

At Protect Your Wealth, we’ve been providing expert advice for all types of life insurance, and retirement and investing planning, since 2007. As your Life Insurance broker and financial planner, we work with you to create a personalized plan for your family or business that covers and meets your needs.

Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today. We’re proudly based out of Hamilton, and service clients anywhere in Ontario, B.C. and Alberta including areas such as Guelph, Kitchener, Barrie, Airdrie, and Kelowna

Frequently Asked Questions (FAQs) about Life Insurance and Suicide in Canada

In some cases yes, in other cases no, this really just comes down to the life insurance policy that the policyholder has. These are some of the possibilities that could happen when a policyholder commits suicide:

  • The beneficiaries are fully paid the life insurance payout since the policyholder committed suicide 2 years after the policy was effective
  • The beneficiaries are only paid the amount the policyholder has paid for the life insurance premiums because of conditions in the suicide clause
  • The beneficiaries are not paid out because of the suicide clause and/or there is an investigation being done about the suicide
  • There are other possibilities too depending on the policy and circumstances

A suicide clause is a provision in a life insurance policy that specifies whether the policy will cover deaths by suicide. As I mentioned earlier, most life insurance policies do not cover suicides during the first year or two of the policy, so the suicide clause will typically specify this exclusion.

Yes, you can get a life insurance policy if you have a mental illness. Mental illnesses will limit some of your options but there are great simplified and guaranteed issue life insurance policies for those with mental illness. 

Talk to an advisor today.

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