What happens to the premiums if an insured commits suicide before the coverage period elapses?

If an insured commits suicide before the coverage period elapses, the typical approach in insurance policies is that the premiums paid are refunded to the beneficiary, provided that the policy is still in effect and the suicide occurs after a specific contestability period. This is often defined in the policy terms.

Insurance policies generally include a suicide clause that specifies that if the insured dies by suicide within a certain timeframe—often the first two years of the policy—the insurer may not pay the death benefit. However, any premiums that have been collected are usually returned to the beneficiary. This provision is designed to ensure fairness, recognizing that while suicide may not be covered under the policy terms during that specified exclusion period, the funds paid by the insured should not be automatically forfeited by the beneficiary.

In contrast, other options like forfeiture of premiums, directing funds to state funds, or transferring them to the insurance company are not standard practices in most insurance agreements, particularly when there is a potential validity of return on premiums for a legal beneficiary. Thus, the correct understanding aligns with the practice of refunding premiums to the beneficiary when the insured commits suicide, following the conditions laid out in the policy regarding coverage timelines.