Does Life Insurance Pay For Illegal Drug Overdose? [Surprising Answer]

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    Does Life Insurance Cover Drug Overdose

    Does life insurance cover drug overdose?  If you’re asking this, you’re not alone.  It’s the 5th most commonly Googled question about life insurance.

    It doesn’t matter what the substance is or how illegal it is to possess it.  Life insurers will pay out the policy’s death benefit, even if the insured’s death resulted from an overdose of drugs or alcohol.

    To prove this out, we’ll first look at excerpts from actual life insurance policy contracts.

    In Section II, we’ll cover the one common-sense caveat to the above.

    And finally, in Section III, we’ll discuss how this answer differs for Accidental Death Insurance (hint: significantly).

    Let’s dive in.

    The Overdose Epidemic

    In 2019, U.S. deaths from drug overdoses reached an all-time high of almost 72,000.  Opioids alone (also referred to as prescription drugs) accounted for more than two-thirds of these deaths.

    That’s 200 new, heartbroken, and irrevocably changed families every day.

    These deaths are part of a larger trend, which has seen overdose death rise nationwide in 19 of the past 20 years.

    Overdose Deaths By Year; 1999-2019
    Drug Overdose Deaths Have Risen Each Year Since 1999
    Source: drugabuse.gov; December 2020

    COVID-19 Has Led To An Increase In Overdose Deaths

    In 2020, COVID-19 made this already difficult situation worse.  Deaths rose by an estimated 13% nationwide, with some regions seeing an increase of ~30%.

    The isolation bought on by the pandemic exacerbated mental health issues, which often co-occur with addiction.

    And more tangibly, the economic effects of the pandemic resulted in the closing of many addiction treatment centers and/or reduced access to recovery support services, which can be life-saving for many.

    If You Need Help, Please Reach Out

    I’ve seen addiction up close.  It’s a progressive illness that only gets worse.

    Just as you would be foolish to try to give yourself a liver transplant, the same holds for treating your own addiction.

    If you’re struggling (or a loved one is), know that there is more help out there than you know.

    And much of it won’t cost you a thing.

    Just start looking for it.

    Does Life Insurance Cover Drug Overdose?

    Having glimpsed the scope of the crisis, let’s return to the main question:

    Can life insurance policy claims be denied if the insured died from a drug overdose? 

    Its turns out that the answer depends on two additional questions:

    • Was the death within or after the first two years of the life insurance policy?
    • Was the drug overdose accidental or intentional?

    Was The Overdose Death Within 2 Years Of Issuance?

    Why does it matter when death occurs?

    It’s because the initial years of your life insurance policy (usually the first two years) are the period when your life insurance company can challenge the validity of your claim and potentially deny the claim.

    This period is therefore called the “contestability period.”

    After the contestability period, life insurance companies can deny claims for only two reasons: (1) if there is an explicit exclusion within the policy or (2) if there was gross misrepresentation on the life insurance application (i.e., fraud).

    The purpose of the life insurance “contestability period” is easy to guess.  Insurance companies do not want to incentivize people to buy a policy and then end their lives for their loved ones’ financial gain.

    Scenario 1: The Death Occurs 2+ Years After The Policy Was Purchased

    The easy case is when the death occurs multiple years after the life insurance policy was purchased.

    RBC Term Policy -- Death Benefit Exclusion
    Excerpt from an RBC Term Life Policy Contract, Showing The Section That Describes Exclusions to the Death Benefit

    After this two-year period, life insurance claims for drug overdose will receive a death benefit payout like those for any other cause of death (e.g., a medical condition).

    Here’s the part that surprises most people, though.

    After the first two years, most life insurance policies cover illegal drug overdose, even if it is intentional (i.e., even if you commit suicide).

    There are no exclusions (e.g., a suicide clause) in most policy contracts that prohibit this.  As striking as it may seem, life insurance policies pay out for suicide, as long as it does not occur soon after the policy purchase (i.e., within two years).

    Scenario 2: The Death Occurs During The First 2 Years

    Now for the trickier situation.  What happens if the insured dies within the “contestability period” (the period during which the insurance company can challenge your claim)?

    So to have your life insurance claim approved and to receive the death benefits you paid for, you have to be able to prove that the death was accidental.

    This could be more difficult if the death involved illegal drugs, like heroin, cocaine, or meth.  In these cases, the insurance company can argue that the insured should have known that these substances were hazardous and that taking them would have a high chance of death.  In other words, it’s easier for them to argue that the insured committed suicide.

    It’s much easier to argue for an accidental drug overdose death if a doctor prescribed the drug.  You can then say that the insured simply took more of something they were supposed to take anyway, by accident.

    When Can A Company Deny A Life Insurance Claim?

    For example, if you stated on your application that you had never attended inpatient drug treatment when, in truth, you had.  In this case, a life insurance company could successfully deny your beneficiary’s claim.

    And life insurance companies nearly always conduct investigations after drug overdose deaths, so lies and misrepresentations are inevitably discovered. 

    Does Accidental Death Insurance Cover Drug Overdose?

    What about an accidental death and dismemberment (AD&D) insurance policy or accidental death life insurance rider?  Does this type of life insurance cover illegal drug overdose deaths?

    Accidental death benefits are paid when the insured dies in an accident or has a severe injury:

    • Accidental deaths (e.g., from a motor vehicle accident), the beneficiary receives the full death benefit
    • For significant injuries (e.g., loss of sight, loss of a limb, coma), the insured gets a specified portion of the death benefit
    what does accidental death insurance cover
    Source: Everquote

    However, there are generally exclusions for death or injury that:

    • Is self-inflicted
    • Occurs during the commission of a felony
    • Occurs while the insured is intoxicated or is under the influence of illicit drugs

    Conclusion

    Just because mental health is less tangible to us does not make it less real.  Addicts deserve adequate treatment, and both they and their loved ones deserve our love and compassion.

    Death from drug or alcohol abuse is no less costly to a family, so it’s nice to see that our laws and life insurance companies are serving their function: to protect families from the financial hardship of death.

    If you have any remaining questions, please don’t hesitate to leave a comment or email us.

    Warm Regards,
    The GetSure Team

    Rikin Shah

    Rikin Shah

    Rikin is the Founder & Head of Content at GetSure. He is a licensed life, accident & health insurance agent, with over 10 years of experience in the financial services industry. He holds a B.S. in Applied Mathematics from Columbia University and an MBA from The Stanford Graduate School of Business.

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