Hello, this is Attorney Oh Seung-hyun of Cheongchul Law Firm.

As Korea's elderly population grows rapidly, insurance disputes involving dementia and mental illness are also increasing. They range from the practical problem that "a person with dementia can hardly file an insurance claim on their own" to the difficult question of "whether insurance benefits are payable where a person took their own life while suffering from a mental illness." This article summarizes the standards courts apply in this area.

Suicide While Suffering from Mental Illness – Benefits May Be Payable

Most life insurance policy terms list "where the insured intentionally harmed himself or herself" as a ground for exemption. However, the Supreme Court has consistently held that "where the insured died in a state in which he or she could not make a free decision due to mental illness or the like, the death was not caused intentionally, and the insurer's claim of exemption is therefore not permitted."

Supreme Court Decision 2025Da203058 (June 12, 2025) and Supreme Court Decision 2023Da240916 (October 31, 2024) reaffirmed this principle. They did not allow the insurer's exemption where the insured harmed himself or herself while suffering from mental illness.

• Medical records showing a mental illness that deprives a person of judgment, such as severe depression or schizophrenia, are the key evidence

• Psychiatric outpatient and inpatient records before death and the opinion of the treating physician are important

Insurance Claims by Dementia Patients – The Designated Proxy Claimant System

It is difficult for a dementia patient to file an insurance claim on their own. For this reason, most life and health insurance policies have a "designated proxy claimant" system. If the insured designates a family member or another person as proxy claimant in advance while still healthy, the proxy can claim the insurance benefits even if the insured's cognitive ability later declines.

The problem is that many people take out dementia insurance without designating a proxy claimant. The Financial Supervisory Service has recognized this problem and is pursuing a plan to expand the types of insurance for which a proxy claimant may be designated. At present, where the insured loses the capacity for judgment without having designated a proxy claimant, the family must have an adult guardian appointed by the court in order to claim the benefits on the insured's behalf, which takes considerable time and expense.

• When taking out dementia or critical illness insurance, be sure to designate a proxy claimant in advance

Failure to Disclose a History of Mental Illness – Risk of Policy Cancellation

Conversely, where a person had already received treatment at a psychiatric clinic before taking out insurance but did not disclose it, the insurer may cancel the contract and refuse to pay benefits on the ground of breach of the duty of disclosure. Courts have likewise held that "where a person had been prescribed medication at a psychiatric clinic at the time of applying for insurance but did not disclose the related treatment history, the contract may be cancelled."

However, there are cases where benefits can be received despite a breach of the duty of disclosure. If there is no causal relationship between the undisclosed condition and the actual insured event, the benefits are paid. For example, where a person took out cancer insurance without disclosing a history of treatment for mental illness, the cancer insurance benefits must be paid if there is no causal relationship between the mental illness and the onset of cancer.

Validity of an Insurance Contract Concluded After the Onset of Dementia

Where an insurance contract was concluded when dementia had already progressed considerably, the validity of the contract may be at issue. Courts hold that a contract is void if the person lacked mental capacity at the time it was concluded. Conversely, where the insurer maintained or renewed the insurance contract while knowing that dementia was progressing, later denying the validity of the contract on the ground of dementia may be found contrary to the principle of good faith.

Seek Legal Review in These Situations

• A family member with a mental illness has died by their own hand and the insurer claims exemption

• A family member with dementia is unable to claim insurance benefits

• The insurer has cancelled the contract on the ground of non-disclosure of a history of mental illness

• The validity of a contract concluded after the onset of dementia is being disputed

Closing

Insurance disputes involving dementia and mental illness are a complex area where medical and legal judgments intersect. Please remember the Supreme Court's established principle that a death occurring while a person has lost the capacity for judgment due to mental illness is not subject to exemption. If you have a related dispute, please request a free consultation with Cheongchul Law Firm.

Thank you.