What is the typical consequence under the 'Suicide Clause' if an insured dies by suicide eighteen months after their life insurance policy was issued?

Question: What is the typical consequence under the 'Suicide Clause' if an insured dies by suicide eighteen months after their life insurance policy was issued?

Answer options:

• The insurer pays the full death benefit regardless of when the suicide occurred.
• The insurer pays 50% of the death benefit if suicide occurs within 5 years. ✅ The insurer returns the premiums paid but denies the death benefit if suicide occurs within the first 2 years.
• The policy is voided with no refund of premiums if suicide occurs at any time.

Correct answer: The insurer returns the premiums paid but denies the death benefit if suicide occurs within the first 2 years.

Explanation: The Suicide Clause usually states that the death benefit will not be paid if the insured commits suicide within the first two years of the policy being in force. In such cases, the insurer typically returns the premiums paid without interest.