What is the purpose of the suicide clause in a life insurance policy?

The purpose of the suicide clause in a life insurance policy is to limit or exclude the payment of the death benefit if the insured individual commits suicide within a specified period, often the first two years of the policy. This clause is included to protect insurers from people purchasing life insurance with the intent of committing suicide shortly thereafter, thereby preventing potential abuse of the policy. By having this provision, insurers can mitigate the financial risk associated with such situations and maintain the overall viability of the insurance pool.

This clause typically specifies that if the insured dies by suicide within the designated timeframe, the insurer will not pay the death benefit. Instead, they might refund the premiums paid into the policy. This provision addresses both ethical concerns and financial risks, ensuring that life insurance remains a genuine security measure rather than a tool for premeditated financial gain through death.