What happens if a suicide occurs during the first two years of a life insurance policy?

In the context of life insurance policies, particularly during the initial contestability period, which is typically the first two years of the policy, the treatment of suicides is often guided by specific clauses included in the policy.

If a suicide occurs within the first two years of the life insurance policy, generally, the insurer will not pay out the death benefit. Instead, the most common outcome is that the insurance company will refund the premiums paid by the policyholder. This provision is designed to discourage individuals from taking out life insurance policies with the intention of committing suicide shortly thereafter as a means of financial gain for beneficiaries.

It's important to understand that each state may have different laws and regulations affecting these provisions, but the refunding of premiums during this period is a standard practice in many insurance policies. This approach allows the insurance companies to maintain some level of financial integrity while adhering to the original intent of the policy.

The other outcomes mentioned in the options would not typically occur under standard life insurance policies, hence they do not reflect common industry practices.