SB 5495
In CommitteeSenate
Life insurance/suicide limit
Adjusting a limitation of liability in life insurance policies.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill shortens the time period during which life insurance companies can deny a death claim due to suicide from 2 years to 1 year for both regular and credit life insurance policies. It also tightens disclosure and delivery rules for credit life insurance and limits allowable exclusions to only fraud or early suicide.
- Reduces the standard suicide exclusion period in life insurance policies from 2 years to 1 year from the policy’s issue date.
- Extends the suicide exclusion period to 1 year for credit life insurance policies issued or renewed on or after January 1, 2026, instead of the prior 2-year window.
- Requires credit life insurance policies to clearly state how benefits are paid (e.g., to the creditor first, then to a named beneficiary or estate if coverage exceeds the debt).
- Mandates that credit life insurance policies or certificates be delivered to borrowers at loan closing—or within 30 days if not provided then—with clear, separate disclosures about coverage, premium, and exceptions.
- Prohibits credit life insurance policies (after January 1, 2026) from including any exclusions or reductions other than for fraud or suicide within 1 year of effective date.
Who is affected
- Life insurance policyholders and their beneficiaries — People who take out life insurance policies (including credit life insurance) may face a shorter window—1 year instead of 2—during which suicide is not covered, potentially reducing payouts to their beneficiaries if death occurs within that period.
- Lenders and credit providers — Lenders and financial institutions that offer credit life insurance as part of loans may see changes in how coverage is structured, delivered, and applied—especially regarding suicide exclusions and policy delivery timelines.
- Insurance companies — Insurance companies must update policy forms and underwriting practices to comply with the new 1-year suicide exclusion period and revised disclosure and delivery requirements for credit life insurance.
- Loan applicants and borrowers — Consumers applying for credit (e.g., auto loans, mortgages) may receive updated insurance disclosures earlier and in clearer format, and will no longer face automatic exclusions beyond fraud or early suicide.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (4)
Mandating clear, separate disclosures at loan closing (or within 30 days) and requiring policies to explicitly state how benefits are allocated (creditor first, then beneficiary/estate) improves transparency and reduces the risk of borrowers unknowingly purchasing expensive credit life insurance with unclear terms—especially protecting low-income and vulnerable borrowers from surprise coverage gaps or overinsurance.
consumer protectionPeopleRef: Sec. 2(2) (post-2026 policies); Sec. 2(2) (disclosure requirements)Limiting exclusions for credit life insurance to only fraud or suicide within 1 year (instead of broader exclusions previously allowed) reduces the ability of insurers to deny claims arbitrarily—making coverage more reliable for borrowers who may already be financially strained.
consumer protectionPeopleRef: Sec. 2(2) (post-2026 policies)Standardizing the suicide exclusion period at 1 year for both regular and credit life insurance creates consistency and predictability—reducing confusion and administrative burden for families navigating grief and claims processes.
consumer protectionPeopleRef: Sec. 2(2) (post-2026 policies)Requiring delivery of policies at closing (or within 30 days) with clear, standalone disclosures helps borrowers understand what they’re buying—potentially reducing impulse purchases or misaligned coverage, especially for subprime borrowers who are more likely to be offered credit life insurance.
consumer protectionLean peopleRef: Sec. 2(3)–(5) (delivery timelines)
Potential Concerns (1)
Shortening the suicide exclusion period from 2 to 1 year reduces the window during which beneficiaries can receive a death payout if the insured dies by suicide within the first year—potentially denying coverage to families during a period of acute vulnerability, especially for those with mental health conditions or recent life stressors.
Rights & LibertiesPeopleRef: Sec. 1(1)(b); Sec. 2(2) (post-2026 policies)
Who Is Most Affected
Low- and middle-income borrowers—especially those with limited financial literacy or in high-risk loan products—are most likely to benefit from clearer disclosures and reduced exclusions. They are also most vulnerable to being denied claims due to suicide within the shortened window, particularly if they have untreated mental health conditions.
Families of deceased policyholders face a narrower window for claim approval if suicide occurs within the first year. However, they gain from standardized, transparent policy language and reduced risk of arbitrary claim denials for other causes.
Lenders may face slightly higher administrative costs to comply with delivery and disclosure timelines, but benefit from reduced disputes and clearer contractual terms—especially since credit life insurance remains a profitable add-on product.
Insurers must revise policy forms and underwriting systems, but the shift to a 1-year suicide exclusion is unlikely to significantly increase claims frequency—most suicides occur within the first year regardless, and credit life insurance is often low-coverage and short-term.
Advocates for mental health and suicide prevention may view the shortened exclusion as stigmatizing, implying suicide is inherently suspect. However, the transparency requirements may indirectly support early intervention by making coverage terms more visible and discussable.