In many cases, life insurance benefits are paid if you are murdered. However, a myriad of circumstances must be examined and considered to determine the likelihood of an insurance company denying benefits to heirs, even in a clear case of homicide. Though each case is individual, the following are common issues that affect whether a life insurance policy will pay out if the insured has been murdered.
TL;DR (Too Long; Didn't Read)
Under most circumstances, life insurance does pay in the event that you are murdered.
Almost every life insurance policy contains language stipulating that the insurer may investigate a client's death to ensure the sanctity of the agreement. These investigations protect the company from unscrupulous consumers or undetected errors that could lead to inappropriate loss on the part of the insurance company.
Most states limit the time which insurance companies may contest a policy payout to two years. Once a life insurance policy has been in force beyond the contestability period, the carrier must pay out all death claims and is unable to object.
If death occurs during the contestability period and the insurance company determines that intentionally inaccurate or misleading information was provided by the policy owner, no benefits will be paid.
Giving false data on an insurance application is considered fraud and voids the contract if the misinformation is detected early enough. Regardless of the manner in which death occurs, including homicide, the policy will become void if fraud is revealed within the first two years of coverage.
In Cases of Suicide
Television is perhaps largely responsible for the high number of misconceptions regarding life insurance and suicide. Countless shows and movies mention or contain scenes wherein a character purchases a large insurance policy and subsequently commits suicide.
In every life insurance contract, suicide immediately voids the contract during the contestability period. A suicidal policyholder's heirs would receive no monetary benefit from the insured's actions. However, if suicide occurs after the contestability period, the insurance company is obligated to pay the claim.
Nearly every life insurance contract contains language stipulating that your policy would be considered void if your death occurs as the result of your participation in criminal activity. In the case of murder, an investigation would likely be conducted by the insurance company to determine your level of involvement, if any, in the criminal behavior that ultimately resulted in your murder. If the insurance company determines that you were a willing participant, rather than an innocent bystander, your life insurance benefits would not be paid to your beneficiaries.
Gregory Gambone is senior vice president of a small New Jersey insurance brokerage. His expertise is insurance and employee benefits. He has been writing since 1997. Gambone released his first book, "Financial Planning Basics," in 2007 and continues to work on his next industry publication. He earned a Bachelor of Science in psychology from Fairleigh Dickinson University.