Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Specific to Life InsuranceHard
A life insurance policy in Texas has a 'Misstatement of Age' clause. The insured stated their age as 35 on the application, but it was later discovered they were actually 40 at the time of application. The policy has a death benefit of $100,000. Assuming a higher age would result in a higher premium, how will the death benefit be adjusted upon the insured's death?
- AThe policy will be voided, and all premiums will be returned to the estate.
- BThe insurer will charge the estate the difference in premiums plus interest.
- CThe death benefit remains $100,000, as the misstatement of age is not material after two years.
- DThe death benefit will be reduced to the amount of insurance the premiums paid would have purchased at the correct age.
Show answer & explanationAnswer & explanation
Correct answer: D. The death benefit will be reduced to the amount of insurance the premiums paid would have purchased at the correct age.
The Misstatement of Age clause states that if the insured's age was misstated, the death benefit will be adjusted to the amount that the premiums paid would have purchased at the correct age. It does not void the policy or require back premiums.
Why the other options are wrong
- A. The policy is not voided due to misstatement of age; the benefit is adjusted.
- B. Charging back premiums is not the typical remedy; the adjustment is to the death benefit.
- C. The Misstatement of Age clause is an exception to the Incontestability Clause and can be applied at any time, even after two years.
Misstatement of Age Clause
A life insurance policy provision that allows the insurer to adjust the death benefit to the amount that the premiums paid would have purchased at the insured's correct age, rather than voiding the policy.
- Adjusts death benefit, not voids policy.
- Applies regardless of the incontestability period.
- Based on premiums paid vs. correct age rate.
- Can result in higher or lower benefit depending on age misstatement.
Memory trick: Age misstated, benefit is re-rated, not negated.