Texas Life Agent Practice Exam

What does the death benefit typically exclude in the case of suicide within the contestable period?

1. The full death benefit is paid

2. Coverage is canceled

3. Only premiums are refunded

4. Partial benefits are paid

The correct answer is: Only premiums are refunded

In the case of suicide within the contestable period, the death benefit typically excludes the payment of the full benefit to the beneficiary. Instead, the insurer generally opts to refund only the premiums paid by the policyholder. The contestable period usually lasts for the first two years of a life insurance policy, during which the insurer has the right to investigate the circumstances of death more thoroughly. The rationale behind this exclusion is that insurers include a contestable period clause to mitigate risk and to discourage individuals from taking out insurance policies with the intention of committing suicide shortly thereafter. By refunding only the premiums, the insurance company protects itself while still recognizing the policy's existence and providing some financial relief to the beneficiaries.