Life Revival, Non-Disclosure and Suicide Exclusion
Meera took a 20-year endowment policy with sum assured ₹50 lakh in 2018. She paid premiums until March 2020, then lapsed the policy. In January 2023 she revived it by paying arrears and submitting a declaration of good health. She did not disclose that she had been diagnosed with depression in 2021 and was on medication. In August 2023 she died by suicide. The insurer has received a claim from her nominee. The policy contains a suicide exclusion clause: death by suicide within 12 months from the date of issue or revival is not covered, only the premium paid is refunded. The revival was within 12 months of the death. The insurer's underwriting guidelines would have declined or imposed a loading had the depression been disclosed. The policy was revived after the insurer's medical examiner certified fitness based only on a questionnaire.
1. Is the nominee entitled to the full sum assured? Analyse the non-disclosure and the revival.
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No. Two independent grounds limit the claim. First, the revival was obtained on a declaration of good health that omitted the 2021 diagnosis of depression and medication. That is material to underwriting: the insurer's guidelines would have declined or loaded the risk. A revival is a new contract requiring utmost good faith, so the insurer can repudiate within the permitted period, here within three years of revival under Section 45 of the Insurance Act. Second, the suicide exclusion clause applies because death occurred within 12 months of revival. Even if non-disclosure were ignored, the insurer would only refund premiums paid. The nominee's recovery is therefore limited to the premium refund, subject to policy terms.
2. Explain how the suicide exclusion clause operates and what the insurer must refund.
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The suicide clause is a contractual limitation, not a defence to all claims. It applies only if death is by suicide within 12 months from the date of issue or revival. Here, revival was in January 2023 and death in August 2023, so the clause is triggered. The insurer must refund the premiums paid, and possibly the arrears paid on revival depending on the clause wording, but not the sum assured. The clause does not require the insurer to prove intention to die; the medical cause of death is sufficient. The questionnaire-based medical examination does not override the clause or the duty of disclosure.
3. Would the answer change if Meera had died in an accident rather than by suicide?
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If death were accidental, the suicide clause would not apply. However, the non-disclosure of depression would still be material if it affected underwriting. The insurer could still repudiate within three years of revival if it shows that the information was material and induced the revival. The fact that the accidental death was unrelated to depression does not automatically make the non-disclosure immaterial; materiality is judged by the insurer's underwriting decision, not by the cause of death. If the policy had passed the three-year period from revival, Section 45 would bar repudiation for misstatement, and the accidental death claim would be payable subject to other terms.