Texas Life Agent Practice Exam

For a Key Employee Life policy with a Double Indemnity clause, what is the insurance company's liability if the insured commits suicide within six months?

1. $0

2. $1,000

3. $2,000

4. $100,000

The correct answer is: $2,000

In a Key Employee Life policy that includes a Double Indemnity clause, the provision typically states that in the event of accidental death, the insurer will pay double the face value of the policy. However, many life insurance policies, including those with a double indemnity benefit, contain a suicide clause. This clause generally stipulates that if the insured commits suicide within a specified time frame—usually two years from the policy's start date—the insurer’s liability is limited. In scenarios where suicide occurs within the first six months, insurance companies often have a definitive stance, usually denying the full claim or offering only a return of premiums instead. Therefore, if this Key Employee Life policy has such a suicide provision in effect, the insurance company would typically not pay the full death benefit. Given this context, the insurance company’s liability in this case would indeed be $0 if suicide occurs within that six-month period, as they would invoke the suicide clause to deny the claim completely rather than providing the double indemnity benefit or any other payout. Therefore, the correct understanding of the coverage limitations in this situation reinforces how policies manage the risk associated with suicide shortly after issuance.