Life Insurance, Suicide & the Two Year/One Year Rules
Life Insurance and the Two Year Rule
After two years, failure to disclose a medical condition on the insurance application probably cannot be used to defeat coverage of a Colorado life insurance policy. Theoretically, a person could lie through their teeth on the insurance application and the beneficiaries could still collect a death benefit so long as the policy is in force for two years before death.
If an insured dies within that two year window, the insurance company can deny coverage if the insured did not fully disclose personal and medical history, even if it has nothing to do with the cause of death. If an insured dies within that two-year period, the life insurance company may make every effort to obtain medical records, look for something that was not disclosed, and then deny coverage. For example, if the insured is hit by a truck and did not disclose treatment for cancer, the death benefit could be denied. The fact that a truck killed the insured may not be relevant.
Colorado life insurance companies are very aware of the two-year rule. Colorado requires that the two-year rule be clearly stated in the life insurance policy. If an insured dies within that two-year window and does not disclose a medical condition, the life insurance company has the upper hand. A beneficiary should not just give up the fight. However, it may be costly to recover the death benefit, and recovery will probably be less than the full death benefit.
Life Insurance, Suicide, and the One Year Rule
In Colorado, a life insurance company cannot use suicide to avoid payment of a death benefit if the suicide occurs more than one year after the life insurance policy is in force. The suicide of a life insurance policyholder after the first policy year of any life insurance policy issued by any life insurance company doing business in Colorado is usually not a defense against the payment of death benefits. It does not matter whether the suicide was voluntary or involuntary, and whether the life insurance policyholder was sane or insane.
The one-year suicide rule does not have to be specifically stated in the life insurance policy. In fact, the life insurance policy typically says just the opposite. For example, the life insurance policy may say that the death benefit will not be paid if the insured commits suicide within two years of the policy issue date. Then, when a suicide does occur within that two-year window, the life insurance company denies coverage making specific reference to the two-year suicide exclusion in the policy. At that point, most beneficiaries give up. It’s in the contract so it must be so? Right? Maybe not. Yet, even when directly confronted with the written law, life insurance companies may still balk at making payment. However, with a little lawyerly persuasion, the life insurance company may pay the full death benefit.
