Rhode Island Life Insurance Practice Exam

What is the primary purpose of the Suicide provision in life insurance?

1. To increase policy premiums

2. To safeguard the insurer from an applicant who is contemplating suicide

3. To provide additional benefits to families

4. To allow immediate payout in traumatic situations

The correct answer is: To safeguard the insurer from an applicant who is contemplating suicide

The primary purpose of the Suicide provision in life insurance is to safeguard the insurer from an applicant who is contemplating suicide. This provision typically states that if the policyholder dies by suicide within a certain period after the policy is issued, the insurer will not pay the death benefit to the beneficiaries. This clause is essential for insurers as it helps manage the risk associated with life insurance policies. By creating this stipulation, insurers can mitigate potential losses from claims made shortly after policies are taken out, which might be an indication of pre-existing intent to self-harm. Thus, it serves both as a protective measure for the insurer and encourages applicants to seek help if they are struggling with suicidal thoughts before obtaining a policy. Overall, the Suicide provision demonstrates the balance insurers must maintain between providing coverage and managing risk.