An Insurance Horror Story: The Suicide Clause

Posted on January 21, 2014 and updated December 4, 2018 in Inspiring Life Insurance Stories, Insurance Types, Life Insurance Canada News, Mortgage Insurance 10 min read
Christine McCarthy

Christine McCarthy was victimized by an abusive husband for years, and now, thanks to his choice to commit suicide, she’s being victimized all over again by her insurance company.

Her husband’s name was Charlie* and he was an abusive alcoholic. The night before his death in April 2003, he had already been arrested for assault on Christine and was out on bail with a restraining order not to come within 30 feet of Christine or her children.

“The night he was arrested for the second or the third time, he had me wrapped up in the comforter —choking me,” she recalls.

At the time, Christine had banned Charlie from their bed. She’d already made him a deal: he could stay in another room in the house until he found a permanent place to stay, as long as he stayed out of their bed. However, on this night, Charlie had other ideas.

“He got in the bed and I said, ‘You’re not sleeping here,’ and he said, ‘Why? Would you rather have your boyfriend in here instead?'”

She didn’t have a boyfriend, but the argument escalated and spun way out of control.

“He twisted me around in the comforter and I couldn’t breathe. I kept trying to call my girls to come and help me. And finally, one of them heard me, and they walked into the room. And he turned and said, ‘Your mother’s going to die tonight.'” That’s when one of her daughters called 911.

In happier times (circa June 2001), Charlie and Christine bought a home together. The problem was that it was a rush job. That would come back to haunt Christine in more ways than she could have ever fathomed at the time.

“We were in a rush for mortgage approval because we had a commitment from one bank and about two or three days before, they screwed up,” says Christine.

“The mortgage broker screwed up the paperwork and got Charlie’s date of birth wrong and the lot number wrong. It was really a mess, so we parted ways with the first bank and went to another bank. And three days before closing, we got mortgage approval with this other bank.”

It was in this rush that the couple signed the papers for the mortgage and at the very bottom, in fine print, a small paragraph read, “You can either accept or decline mortgage insurance.”

Mortgage insurance is there to pay off your mortgage when you or your spouse dies. The couple accepted it by checking a box and signing on the dotted line, but Christine insists she had no idea what they were signing.

“We never saw a policy. We were never told to get a health exam. We never did anything. I never got anything mailed to me. I never got anything ever,” she says.

This is common with mortgage life insurance policies offered by banks because banks engage in post-claim underwriting with these policies, meaning they don’t do the underwriting until the coverage is about to be issued. So policyholders may be declined even after paying the premiums — right when they need the coverage most.

In any case, Christine and Charlie moved on and continued their volatile relationship until one fateful day in April 2003, when Charlie, who’d been staying at his parents’ house since his arrest, showed back up at Christine’s door, demanding to be let in.

“The night before he died, Charlie called me, saying that he needed to be let in because people were after him,” says Christine. “‘Who’s after you?’ I asked, and he said, ‘Who do you think? The police.'”

After a brief verbal tug of war, with Charlie wanting in and Christine wanting to keep him out, Charlie eventually hung up. However, five minutes later, he arrived at the door, which Christine proceeded to lock. He begged, pleaded, and cried to be let in.

At this point, everyone in Charlie’s family was fed up with his behaviour. Christine called his step-father, Sam*, to ask what she should do. Sam endorsed her decision not to let Charlie in. Eventually, Charlie left, but not before calling Christine and finding out that she’d spoken to Sam.

“I told you everyone was against me!” Charlie screamed. “Tell you what, check your paper tomorrow. I’ll be in it. This is my last night on Earth!”

Christine tried to call Sam to tell him what Charlie said, but she only got Sam’s voicemail, so she went to work the next day and pushed the cryptic conversation with Charlie from her mind.

Turns out, that night, Charlie made good on his threat and hanged himself in the basement of his parents’ home, as one final attempt to get back at Christine.

“I was hysterical,” Christine remembers. “I kept saying, ‘I should’ve just let him in. I should have just let him in.’ But the authorities told me that they believed that, had I let Charlie in, they would be dealing with a murder-suicide.”

Christine would remain inconsolable much longer because, when she tried to redeem that mortgage life insurance policy from 2001 to pay off the house, she was told that her claim would be denied because of the policy’s suicide clause exclusion.

A suicide clause is common on all life insurance policies, and it basically says that if the policyholder commits suicide within the first two years of the policy being active, then the beneficiary receives none of the expected coverage.

“You don’t want somebody buying a policy knowing that they will plan to commit suicide. There is, in every life insurance policy, some sort of suicide clause in it. There’s a period of time where something like suicide will be excluded and that will be written in the policy,” says Wendy Hope, Vice-President of External Relations at the Canadian Life and Health Insurance Association (CHLIA)

“I find it very unusual that there was absolutely no paperwork involved because there always is. Maybe her husband had it all, right? What I can say is, she should go through the available complaints process. There should be paperwork and if the representative doesn’t seem to have it, always ask for it. It’s best to be an informed consumer.”

When Christine got the bad news, she was dumbfounded and instantly hung up the phone. But after thinking about it for a few moments, she realized this had nothing to do with insurance.

“If he wanted the coverage for his beneficiaries, he would’ve waited the eight or nine weeks for the clause to expire. His suicide had nothing to do with insurance. He was trying to get back at me.”

So Christine started writing to the insurance company and began to plead her case to the bank and the insurance company’s president, the bank’s ombudsman, and anyone else she could think of.

“Just for her own knowledge, she should go through the complaint process,” recommends Hope. “Every insurance company has an Ombudservice. But, if she’s not satisfied with what she’s hearing, she can always go to the Ombudservice for Life and Health Insurance. Now, if the policy is with a bank, it’s a little more of a grey area because mortgage life insurance is different from regular life insurance, so she may have to go through the Office of the Superintendent for Financial Institutions [OFSI], which is the bank’s ombudservice.”

Now, after little response, Christine is about to sue the bank that sold her the mortgage life insurance policy, arguing that at the very least, they didn’t do their due diligence when dealing with her and they violated their fiduciary responsibilities to her. She also wants to change the way the suicide clause on life insurance policies is evaluated.

“Every insurance policy should be evaluated on a case-by-case basis and every circumstance for suicide investigated and taken into consideration before making such a sweeping blanket decision like the suicide clause allows,” she says, giving the following example as food for thought. “If there were a couple who had a child and that child was killed, but one of the parents was so overwhelmed with grief that they killed themselves, and that same family had just purchased a house in the last two years, do you mean to tell me that the other spouse wouldn’t be entitled to mortgage insurance because their partner committed suicide?”

Christine also asks us to keep in mind that the remaining spouse is not only dealing with the suicide, but now they have this financial hardship of having to pay a mortgage even though the suicide had absolutely nothing to do with collecting the life insurance money.

“It’s just not right,” says Christine. “But I’m ready to fight. If not for me, then to change the way the clause is applied and to make sure every case is evaluated individually. I want to let people know that they can fight ‘the big guy’ and not to be intimidated by all the lawyers in fancy suits and all the legal terminology. Finally, I’m not going to let them wear me down or wear me out because that’s what they try to do — put you off long enough that you run out of strength, energy, money, and will. Enough is enough.”

*All names associated with Christine’s husband have been changed (at Christine’s request) to protect the reputation of his family.

LSM’s Take: Any insurance policy Christine would take out would have a two-year suicide clause. We understand that Charlie did not take out the policy with the intent of committing suicide, but usually, when the suicide happens, that is the case. This is why the two-year suicide clause is in place. In this particular instance, Christine made the mistake of not requesting paperwork and not knowing what she was buying before she accepted the terms. This is a mistake no consumer should make. However, perhaps the circumstances of each suicide case should be investigated and evaluated, as it seems grossly unfair to further penalize a family already dealing with tragedy just because of someone else’s actions — particularly when those actions may have been brought on by any number of things far removed from the insurance realm.

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Gloria Wolk
Gloria Wolk

Again reading the news story I realized the mortgage insurance policy was issued in 2001. In the US the suicide clause is effective only for the first two years after the policy is issued or, if it lapsed and was reinstated, two years from the date of reinstatement. Although insurance law is enacted by each state, this is universal throughout the US.

Why doesn’t Canada have such a provision? Apparently a person who commits suicide 20 years after being a policy can forfeit the protection for the family.

LSM Insurance
LSM Insurance

Thanks for the note. The suicide provision in Canada is 2 years as well. The death occurred in those 2 years

Julie
Julie

I find it interesting that a sane person can sign off on something that an ‘insane person’ does down the road.

When people commit suicide, they are not of sound mind…..or people wouldn’t commit suicide.

So, if a person goes insane and commit’s suicide because of a clear mental health problem the family is told ‘too bad, not paying out’? That doesn’t fly with me.

Gloria Wolk
Gloria Wolk

This happens far more often than most people realize. Years ago, when I was in financial services, I met with a widow who wanted life insurance in order to protect her children. She told me her husband had committed suicide days before the two year suicide clause would have expired. The family was left with nothing. For a while the widow had to go on government benefits in order to care for her children. The suicide clause if for two years after the policy is issued or reinstated. TV programs mislead the public when they claim it is forever. Most… Read more »

David McGoey
David McGoey

With life insurance all the underwriting is done before issuing a policy and so the life insurance company is aware of your medical history and will let you know whether you are an average, above average or a below average client (or declined due to medical history) and will issue the premiums based on the information they receive. Mortgage insurance all the underwriting is done afterwards when you claim.To the best of my knowledge if they check off that they want mortgage insurance, then they still fill in a mortgage insurance application. That is the only contract that they have… Read more »

David McGoey
David McGoey

With life insurance all the underwriting is done before issuing a policy and so the life insurance company is aware of your medical history and will let you know whether you are an average, above average or a below average client (or declined due to medical history) and will issue the premiums based on the information they receive. Mortgage insurance all the underwriting is done afterwards when you claim.To the best of my knowledge if they check off that they want mortgage insurance, then they still fill in a mortgage insurance application. That is the only contract that they have… Read more »

daniel kahan
daniel kahan

Roberta,great comment! I assume they have exactly the same wording in the US and the result would have been the same in this particular case. Wouldn’t it make sense to tweak the wording so that the onus is on the insurer to prove beyond a reasonable doubt that the life insured (who is not always the policyholder) had the intent of committing suicide at the inception of the policy? Isn’t that the rationale behind the 2 year Incontestability Clause which still pays claims where there was no indication of any sudden illness or disease when the policy was taken out?… Read more »

LSM Insurance
LSM Insurance

Do people think the Christine would have done something differently if she had known fully about the suicide exclusion, either at the time they purchased the policy or at the time of her spouses suicide? Who thinks such a clause is going to be applicable when they take out a policy in circumstances like that? (Some individuals may purchase policies specifically to commit suicide and leave the money to their families, but I’m guessing that that was not on the widow’s mind at the time they were buying a house.)

Bruce P
Bruce P

has a responsibility to make sure the insured understands what they are signing” – why? the law does not require it, why would anyone voluntarily assume that responsibility? Again it appears that society would like to place blame elsewhere, if she lacked the mental capacity to contract (a legal standard), then she can get out of it, if she has capacity to contract, then she needs to understand what she is signing or get legal help before she signs it. Ignorance is not an excuse, the courts do not encourage ignorance by allowing the uninitiated to escape their own mistakes.

Kristy
Kristy

I started in claims in 1979 and there has ALWAYS been a suicide clause and in fact its been mentioned in countless TV series, movies and so forth. Victimized? Buyer beware, if you are purchasing an insurance policy read the policy before you purchase. It’s not hard to get a list of exclusions.

David McG
David McG

Although I am loathe to admit it, really the banks didn’t really do anything wrong. I think what people are missing here is that even if it was a regular life insurance policy, it would still have not paid out due to the suicide clause. Even if Christine knew about the clause, after being abused do you think she still would have opened the door? Would Charlie have delayed or postponed his suicide? No one can tell, but as Christine said, he wanted to get back at her!! The suicide clause is standard on all policies, and I bet that… Read more »

LSM Insurance
LSM Insurance

Tom,in this particular case both the husband and the wife purchased mortgage insurance protection because they had just bought a house presumably at the behest of the bank. It certainly seems exceptionally far-fetched that the husband contemplated suicide at the time he bought the house and that when he did commit suicide it was to either allow his wife to pay off the mortgage or to spite her by not waiting a few extra weeks. So while technically the bank can rely on the suicide exclusion the Ombudsman should exert some moral pressure by threatening to publicly name (and shame)… Read more »

LSM Insurance
LSM Insurance

Where is the bank’s corporate social responsibility? They have to bring out an Annual Report showing how much they donated to charities and other good causes, so how about adding this case to the Report and show their policyholders that charity starts at “home” ??

John Valis III
John Valis III

Between articles such as this and the expose that the CBC Marketplace did, I am actually surprised that this kind of life insurance is still available and offered by non-licensed individuals. I have nothing against mortgage brokers, I am even friends with a few, but I do not appreciate the way in which mortgage life/ci/di is used. I have clients who had no idea that it would not pay out should the husband suffer from a seizure, because it was a preexisting condition. Likewise that the LI side might not should a seizure be involved with his passing. Thank you… Read more »

Frank
Frank

Thanks for bringing this to my attention.

LSM Insurance
LSM Insurance

You’re welcome Frank.

LSM Insurance
LSM Insurance

Tim – strong words – but good on you! Well spoken words.

LSM Insurance
LSM Insurance

sad story ! It reinforces the fact that policy should be properly explained and understood before going further

LSM Insurance
LSM Insurance

There needs to be more pressure placed those in power to have these products abolished, it is a crying shame that people time and time again lose their homes and their family are put on the street because they can’t afford their home when the main bread winner dies. Many believe they have the coverage they need to protect their families biggest need, shelter and their family home, when it is taken from them at their worst moment in time, when they lose their loved one. The last thing anyone needs to deal with during the grieving process is looking… Read more »

Bruce
Bruce

I am at a loss to determine how she is being “victimized” – a suicide clause is standard in a life policy that she failed to read what she signed is not the insurers fault. Post “claim” underwriting is exactly what it says, its getting the information after the claim…not just after being issued. Sad story, yes, abused by her ex, sure, but that does not equal being “victimized all over again”.

LSM Insurance
LSM Insurance

Thanks Bruce. I agree the insured should read what they sign- unfortunately most people don’t do this. I believe the representative asking the questions also has a responsibility to make sure the insured understands what they signed and is aware of what they bought

Tim Hazlett
Tim Hazlett

Mortgage Insurance should be outlawed but it seems someone is making way too much money for the Canadian Gov’t to change the rules of providing mortgage/creditor insurance through banks. I recently had a client that lost her insurance when she renewed her mortgage through the same bank. What a crime, they can actually take your insurance away from you after you have owned the plan for a number of years, they gave back her premiums she paid, without interest, so someone made interest off her money, but never gave it to her. Wow!

LSM Insurance
LSM Insurance

Tim. That’s also a very sad story but unfortunately variations of more or less the same story are quite common.

Stuart
Stuart

Why does anyone sign on to mortgage life insurance? Such a waste of money. Good for you Chantal to alert the public to this.

LSM Insurance
LSM Insurance

I hear you. I really is. Thanks for your input.

Brian So
Brian So

Tragic story, but the suicide clause on the policy is quite black and white. There’s no provision to assess each suicide on a case by case basis.