What happens to the death benefit of a life insurance policy if the insured commits suicide within the first two years of the policy issue date?

Question: What happens to the death benefit of a life insurance policy if the insured commits suicide within the first two years of the policy issue date?

Answer options:

• The full death benefit is paid. ✅ The claim is denied, and only a refund of premiums paid is returned to the beneficiary or estate.
• A reduced death benefit is paid.
• The death benefit is paid to the government.

Correct answer: The claim is denied, and only a refund of premiums paid is returned to the beneficiary or estate.

Explanation: Nearly all life insurance policies in Canada contain a suicide clause, which states that if the insured dies by suicide within two years of the policy's start date, the insurer's liability is limited to a refund of premiums paid.