What occurs if suicide happens within the first two years of a policy?

If suicide occurs within the first two years of a policy, the typical industry standard is to refund the premiums paid, minus any outstanding policy debt. This provision is often included in life insurance policies to prevent individuals from purchasing life insurance specifically as a means to secure a financial benefit for their beneficiaries through suicide. The rationale behind this clause is to encourage the intent of the policy, which is to provide protection and support, rather than to create a financial incentive for self-harm.

In most cases, after the two-year contestability period, the insurer would pay the full death benefit regardless of the circumstances of death, including suicide. This approach balances the need for insurers to protect their interests while also providing a degree of assurance to policyholders that their loved ones will be financially supported after their passing, assuming the policy was in force for a sufficiently long period. Therefore, if suicide occurs during the specified initial period, the policyholder's beneficiaries generally receive a refund of premiums, but without additional benefits.