New Jersey Life and Health State Practice Exam

The suicide clause in a life insurance policy is designed to address the situation where the insured takes their own life within a specified period, typically two years from the policy's start date. This clause protects the insurer from potential abuse of the policy, ensuring that someone does not take out a policy just to benefit financially from a suicide shortly thereafter.

When this clause is invoked, it typically allows for the return of premiums paid, minus any outstanding debts on the policy, and without interest. This means that while the insurance company does not pay out the full death benefit in cases of suicide within the specified period, they still provide a refund of the premiums to the beneficiaries. The absence of interest in the refund reflects the insurer’s policy to mitigate the risk of claims made shortly after a new policy is purchased.

Understanding this context helps clarify why the correct answer pertains to the return of premiums minus indebtedness and without interest, accurately reflecting the typical stipulations of the suicide clause in a life insurance policy.