All the statements concerning the treatment of suicide in life insurance are correct EXCEPT:

• A. Most states permit suicide exclusions for 2 years or less.
• B. The insured's state of mind at the time of the suicide can determine whether the death benefit is payable.
• C. If the insured was sane when they committed suicide 5 years after the policy was issued, the company is usually liable only for return of the premiums paid.
• D. If there is no suicide exclusion clause in the policy, the death benefit is payable even if the insured commits suicide and intended to do so when the policy was purchased.

Answer: (C)

The key idea is how suicide is treated under life insurance policy provisions: there is often a suicide exclusion for a short period after issue, and after that period the death benefit generally becomes payable, regardless of the insured’s intent.

The statement claiming that a person who commits suicide five years after the policy was issued would usually lead to the company paying only the return of premiums is the exception. That five-year timeline is well beyond the common suicide exclusion window (often two years or less). Once that initial period has passed, the death benefit is typically payable in full, not limited to premium refunds, unless other exclusions apply.

The other statements fit typical coverage logic: many states permit a suicide exclusion of up to about two years, so that part is accurate. The idea that the insured’s mental state at the time can influence payout reflects the reality that some policies or laws address insanity or mental incapacity as a factor, even though the standard timing rule is the main driver of whether the full benefit is paid. And if a policy has no suicide exclusion clause, the death benefit would be payable even if the death is a suicide and the intent to do so existed at purchase, since there’s no exclusion to trigger denial.