Is there a waiting period before life insurance becomes effective?

There are policies called “guarantee issue life insurance” where there is usually a two year period in which no death benefit is paid if you die, except if the death is due to an accident. With a guarantee issue policy, if you die during the first 2 years the company will return all of the premiums paid, plus 8-10% interest. After the two years they would pay the full death benefit for any cause of death.

With traditional term or permanent life insurance the answer we use around the office is “no, as long as you tell the truth and don’t do yourself in”. Every traditional policy has a 2 year suicide and contestability period. During the first two years the company doesn’t have to pay if the death is due to suicide or due to something that was misrepresented on the application. If you are completely honest on the application and don’t do yourself in, the policy is fully in force from the date the first premium is paid until you quit paying premiums.