Tennessee Life Producer Practice Exam

How do life insurance companies respond to claims made when the insured commits suicide within the contestable period?

1. The claim is honored with full payment

2. Claims are accepted without question

3. Claims are denied under the Suicide clause

4. Claims are paid at a reduced amount

The correct answer is: Claims are denied under the Suicide clause

Life insurance policies typically include a contestable period, which is a specified duration (usually two years) during which the insurer can investigate and potentially deny claims based on misrepresentation or non-disclosure of relevant information by the policyholder. When a policyholder commits suicide within this contestable period, the insurance company activates the suicide clause of the policy, which specifically addresses claims made under these circumstances. The suicide clause is designed to protect insurers from potential abuse where individuals may purchase insurance with the intent of committing suicide shortly thereafter to benefit their beneficiaries financially. Under this clause, if the insured dies by suicide within the contestable period, the insurer is allowed to deny the claim altogether. This means that the company will not pay out any death benefit to the beneficiaries, as the death is categorized under conditions that the policy does not cover at that time.