If James commits suicide 18 months after purchasing a life insurance policy, what is the insurer obligated to pay his beneficiary?

When considering the situation of James committing suicide 18 months after purchasing a life insurance policy, it's important to understand the typical terms related to suicide clauses in life insurance contracts. Most life insurance policies include a suicide clause, which typically stipulates that if the insured takes their own life within a certain period, generally the first two years of the policy, the insurer may only be obligated to return the premiums paid rather than paying out the full death benefit.

In this scenario, since James committed suicide 18 months after purchasing the policy, he falls within that initial contestable period. Therefore, according to standard practice regarding life insurance policies, the insurance company is not liable to pay out the death benefit but will refund the premiums he paid. This aligns with the purpose of the suicide clause, which is to prevent the purchase of insurance with the intention of benefitting the policyholders' beneficiaries through self-harm shortly after acquiring the policy.

Ultimately, this illustrates how life insurance providers manage risks associated with moral hazard and ensures that the benefits of a life insurance policy are not misused.