What is the usual payout if an insured dies by suicide within the first two years of a life insurance policy?

In many life insurance policies, there is typically a contestability period that lasts for the first two years after the policy is issued. This means that the insurance company has the right to investigate the circumstances surrounding a claim for death benefits during this time frame. If the insured dies by suicide within these first two years, many policies do not provide a full death benefit payout.

However, the usual practice for cases of suicide during this contestability period is to refund the total premiums paid into the policy. This is intended to ensure that the beneficiaries are not left empty-handed in the tragic event of a suicide while also allowing the insurer to manage risk associated with premature claims. While the full death benefit is not available due to the circumstances, the refund of premiums serves as a partial remedy for the policyholder’s investment in the insurance plan.

This practice acknowledges the emotional and financial impact of a suicide, allowing loved ones some compensation, albeit not as a full benefit, but rather a return of the funds contributed.