What is the outcome if an insured commits suicide within the first 2 years?

When discussing the outcome of an insured committing suicide within the first two years of a life insurance policy, the correct response indicates that only premium payments are refunded. This is typically due to the suicide clause, which is standard in most life insurance contracts. The purpose of this clause is to protect the insurer from potential abuse of insurance policies, where an individual might take their own life shortly after obtaining coverage to ensure a payout to beneficiaries.

The suicide clause usually states that if the insured commits suicide within the specified period (often two years), the insurance company will not pay out any death benefits. Instead, the insurer will refund any premiums that have been paid up to that point. This helps to alleviate the risk for the insurance company while still providing a measure of financial relief to the insured’s beneficiaries in the form of a refund of premiums.

This reflects the balance between providing coverage and protecting against fraudulent claims, ensuring that people do not purchase insurance with the intention of committing suicide for financial gain. In contrast, if the insured were to commit suicide after the two-year period, the policy generally pays out the full death benefit, as the insurer would not apply the suicide clause.