I'm currently reading terms for life insurance with survival benefit and investment. It's like you pay ten thousand USD each year and five years later you get back forty thousand USD (the four payments you made) and maybe some investment income. Also you're protected against sudden death or disability - in such cases you (or your family) get paid the whole forty thousand USD (or sometimes several times more) right after the unhappy event.

One kind of unlucky events is called "death for any reason" (as opposed to "death because of accident" which is a separate kind of unlucky events). "Any reason" is not really any reason - it excludes a number of reasons such as serving in army, taking part in a riot, drinking heavily, diving alone (no matter how deep), a lot of them. It also excludes suicide but only for the first two years of the policy and only if it wasn't caused by illegal actions of other people.

I don't get it. It makes sense that the insurance company doesn't want to cover the insured person's family in case he himself causes his own death. What's the difference between the first two years and the later years?

Why is the insurance company only refuses coverage if the event happens during the first two years but not later?

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    @DanielCarson has a good answer to your question, but I wanted to add that you seem to be considering 'Whole Life' insurance, which advertises itself as both an insurance product and an investment vehicle. It is strongly recommended that you avoid these products. They often have higher fees associated than simply buying a separate insurance policy + investment plan. Your situation may be different, but search this site for "Whole life insurance" and you will see many responses indicating the limitations of these products. Commented May 25, 2017 at 13:58
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    Maybe because 2 years is long enough to weed out most of the people that were suicidal when they opened the policy, and beyond that they don't want to give any incentive to someone to stage their own murder or try to make it seem accidental.
    – TTT
    Commented May 25, 2017 at 15:43
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    Insurance is fairly heavily regulated in the US, mainly by states. There could be a state law that limits the suicide exclusion period to two years. In what state is this policy being issued? Commented May 25, 2017 at 15:47
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    Whole Life insurance. Avoid like the plague. Whichever reasoning or influence which led you to believe this might be a product for you... should be scrupulously examined and generally thrown out of your life. If an outside person was involved, they are out to profit for themselves at your expense (via very high commissions on those products) and should not be trusted with your finances. Use only advisers who only take upfront fees for their counsel, and get paid in cash by you. Commented May 25, 2017 at 21:14

2 Answers 2


I believe that the insurance company wants to discourage people from making money by committing suicide. If the insurance company covered suicide for the whole term then a suicidal person with $10,000 could end their life and leave their family $40,000. This not only hurts the company's profitability, but it also (to a very small degree!) encourages people to commit suicide.

What's the difference between the first two years and the later years?

They significantly mitigate the effects of providing any coverage for suicide by limiting it to the last three years of the policy. It's similar to the waiting period that same states mandate when someone is purchasing a firearm. If a suicidal person were to enroll in this plan with the intention of harming themself, then they have two years to get professional health and recover.

Then there's the question of why should an insurance company cover suicide at all? A common view today is that clinical depression is a mental illness and not a choice. Under this view, illness is the cause of suicide.

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    This is called avoiding the creation of a "moral hazard". Another example would be an insurance company not insuring your car for more than it's worth, even if you're a perfect driver - because you would then make a profit by driving recklessly / purposefully causing an accident. Commented May 25, 2017 at 13:56
  • I like what you're saying here, but I don't feel like it really answers the question. The question is why only two years, and you're kind of saying "I don't know, I'm surprised too".
    – TTT
    Commented May 25, 2017 at 15:37
  • @TTT, fair enough. I've attempted to answer that part of the question.
    – Nosrac
    Commented May 25, 2017 at 15:51
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    Excellent edit (and I tweaked it). +1 from me.
    – TTT
    Commented May 25, 2017 at 15:53

As others have mentioned insurance is a highly regulated industry. There is a common rule called a contestability period, typically two years. Typically, if you pass within the contestability period an insurer gets to re-review your application and potentially deny claims. There are laws limiting the contestability period to prevent life insurers from essentially handing out policies willy-nilly then underwriting them when a claim arises. After the contestability period has elapsed an insurer has very little legal wiggle room to avoid paying a claim, even if you lied on your application or caused your own death.

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