Does a drug overdose break a life insurance policy?

Check the terms and exclusions in the policy.

If the drug overdose is accidental, this may be covered by the insurance. However, if the overdose is intentional, as when the insured attempts to commit suicide, this may be excluded in the policy for the first two years or during the prescribed waiting period.

Also, some insurance policies exclude illegal activities, where the abuse (whether intentional or accidental) of recreational drugs may be included. In this case, the life insurance company may dispute the claim and refuse to pay the death benefit. There are even life insurance policies that specifically add drug overdose under the items excluded in the policy.

There may also be some disputes as to whether the insured was honest and gave full disclosure of his drug use at the start of the policy. If the life insurance company discovers that the insured lied or hid something in his application that would have caused the application to be rejected, then the life insurance company reserves the right to cancel this policy. They can do this within the two-year waiting period. This means that the overdose can render the life insurance policy invalid.

Within the two-year contestability period, the life insurance company can dispute and deny the claim if they find out that the insured was already a drug user at the time he applied for the insurance.  

The comfort is that, after the two-year contestability period, life insurance companies will usually agree to pay the claims, whatever the cause of death is. The burden of proof that there was an intent to defraud (to get death benefits) lies on the life insurance company. They have to prove that there was deceit and intention involved. These may be difficult to prove.

The guiding principle is that there is a contract that the life insurance company entered with a man, and when that insured person is dead and the insurance company cannot really explain whether there was fraud or not, the life insurance company is expected to pay for the claims. This is usually the case for big life insurance companies.

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