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Strauss's avatar

If assisted suicide were legal, how would that affect the life insurance industry?

Asked by Strauss (21157points) February 9th, 2015

(Inspired by this question)

Let us assume, for the sake of this discussion, that assisted suicide were to be legalized. Most life insurance policies have a suicide clause, stating that any death payout is nullified by suicide. Do you think that might change if assisted suicide were legalized, or would it be incumbent upon the individual to cash out such policies before the actual act?

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8 Answers

keobooks's avatar

I don’t know about life insurance, but health insurance would likely be all for it. It can cost tens of thousands of dollars to keep someone critically ill alive for even just a few weeks or days. Suicide cocktails cost less than 500$ for the most part.

Considering that most insurance companies have life AND health insurance, I’m sure that something will work out in assisted suicide’s favor.

SQUEEKY2's avatar

Terminally ill people wouldn’t qualify for life insurance, and if they obtained the insurance before they became terminally ill, better make sure there isn’t a clause in the insurance about terminal illness.

SavoirFaire's avatar

There are two relevant clauses in most life insurance policies: the contestability clause, and the suicide clause. Both apply to the first two years of the policy’s existence, but they are otherwise importantly different.

The contestability clause allows the insurer to investigate and deny claims if it turns out that important information was withheld when the insured was applying for the policy. So if someone had already been diagnosed with a terminal illness or was planning to commit suicide when they applied, failing to disclose that information would invalidate the policy (since it is likely the company would not have issued the policy in the first place had the applicant been honest).

The suicide clause simply says that the policy will not pay out if the insured commits suicide within two years of the policy being issued. It also requires the company to return any premiums already paid by the insured. After two years, the policy pays out as normal regardless of the cause of death. This is important because many people fail to file a claim due to the mistaken impression that suicide always invalidates a life insurance policy.

So what does this mean for assisted suicide? If other states follow Oregon’s lead, then the suicide clause will become more or less irrelevant because the Death with Dignity Act requires insurance companies to pay out the deceased’s life insurance policy regardless of when it was taken out. The contestability clause would still be relevant, however, because an insurer retains the right to deny a claim if the policy was obtained fraudulently.

Life insurance companies have been surprisingly unconcerned about this part of the Death with Dignity Act and seem uninterested in lobbying against it. I suspect this is due to a mix of the cost-balancing reasons that @keobooks mentioned and actuarial tables predicting that very few cases the insurer could expect to win would fall under the suicide clause while not also falling under the contestability clause. Therefore, it is likely that any new measures legalizing assisted suicide will follow the same pattern of granting an exception to the suicide clause while leaving the contestability clause in place.

Coloma's avatar

@SavoirFaire Makes sense and I agree.

CWOTUS's avatar

When I first bought a life insurance policy on myself, nearly 30 years ago, I was told that the “suicide clause” was in effect for the first two years of the policy, if I’m recalling that correctly.

I don’t think there would be a huge difference in the industry. It would probably more than balance out with the costs of health insurance, which are currently extremely weighted toward the last few months of life for most people.

JLeslie's avatar

@SaviorFaire I wonder what would happen if the term insurance was running out and the person made sure they committed suicide before it did.

SavoirFaire's avatar

@JLeslie The Oregon statute does not distinguish between types of life insurance, so an insurer would still be required to pay out a term life insurance policy so long as they could not invalidate it under the contestability clause. If other states were to follow Oregon’s lead, then, this would be the case elsewhere as well.

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