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Madoff Investigators May Look for Insurance Fraud

If Mark Madoff's had life insurance, investigators may look closely at how it was purchased.

Mark Madoff
Mark Madoff

"You can bet they'll be searching for evidence of fraud," one insurance industry veteran said.

Madoff, the son of Ponzi schemer Bernard Madoff, killed himself by hanging in New York City on Saturday.

Most life insurance policies have a "suicide clause" which won't pay out benefits if the buyer commits suicide within two years of the date of purchase. The clause is designed to prevent fraud by people who buy insurance with the intent to kill themselves. Underwriters assume a distraught person wouldn't be able to wait two years before committing suicide.

Typically, if a suicide occurs more than two years later, the insurer will pay. The death is not considered fraud at that point. Secondly, suicide is viewed by underwriters as "a sickness...sort of like having a heart attack," the insurance agent said.

Whether Mark Madoff had life insurance isn't yet clear.