What is the company's obligation if the policy owner commits suicide within a year?

When a policyholder commits suicide within the first year of the policy, the life insurance company's general obligation is to refund all premiums paid by the policyholder. This provision is known as the suicide clause, which is a common feature in many life insurance policies. The rationale behind this clause is to prevent potential abuse of the policy—moral hazard—where an individual might take out a policy with the intent to commit suicide shortly thereafter for the benefit of their beneficiaries.

By refunding the premiums rather than paying out the death benefit, the insurance company aims to limit its exposure to this kind of risk within that initial period. Thus, the correct answer accurately states the company's obligation under these circumstances.