What is a suicide clause?

A suicide clause is a specific provision found in life insurance contracts that limits the insurer's liability in the event of the insured's suicide. Typically, this clause specifies that if the insured takes their own life within a certain period after the policy is issued—commonly two years—the insurance company will not pay the death benefit. Instead, they may only refund the premiums paid. This is designed to discourage individuals from purchasing life insurance with the intent to commit suicide shortly thereafter, thereby protecting the integrity of the insurance system.

The inclusion of this clause is based on the recognition that suicides can be a risk factor that insurers must manage. By having this stipulation in place, insurers aim to prevent insurance policies from being exploited as a means for financial gain in cases of suicide.