Texas Life Agent Practice Exam

What is a true statement about a typical suicide clause in life insurance policies?

1. Suicide is covered immediately

2. Suicide is excluded for a specific period of years and covered thereafter

3. Suicide leads to automatic policy cancellation

4. All policies include a perpetual suicide clause

The correct answer is: Suicide is excluded for a specific period of years and covered thereafter

A typical suicide clause in life insurance policies often states that suicide is excluded for a specific period of time, commonly ranging from one to two years after the policy is issued. This exclusion is put in place to prevent individuals from taking out a policy with the intention of committing suicide shortly after, thereby defrauding the insurance company. After this period elapses, if the insured commits suicide, the policy would generally pay out the death benefit to the beneficiaries. This design serves to balance the risks taken on by the insurer while still providing coverage. It reflects the understanding that, while suicide is a tragic event, insurance policies must include such clauses to mitigate moral hazard associated with the potential for rapid claims soon after entering into the contract.