A life insurance policy states that if the policyowner misstated their age on the application, the death benefit will be adjusted to the amount that the premium paid would have purchased at the correct age. What is the impact of this provision if the insured was actually older than stated?
- AThe insurer would retroactively charge the policyowner for the difference in premiums, plus interest.
- BThe death benefit would be increased to reflect the higher premium for the correct age.
- CThe death benefit would be reduced because the premium paid would have purchased less coverage at the correct, older age.
- DThe policy would be immediately voided, and all premiums refunded.
Show answer & explanationAnswer & explanation
Correct answer: C. The death benefit would be reduced because the premium paid would have purchased less coverage at the correct, older age.
The Misstatement of Age or Sex provision states that if the insured's age or sex was misstated, the amount payable under the policy will be adjusted to the amount that the premium paid would have purchased at the correct age or sex. If the insured was actually older than stated, the original premium would have purchased less coverage, so the death benefit would be reduced. If they were younger, the death benefit would be increased.
Why the other options are wrong
- A. While some policies *might* allow this, the standard provision explicitly states the *benefit* is adjusted, not a retroactive premium charge.
- B. Incorrect. If older, the same premium buys less coverage, so the benefit would be reduced, not increased.
- D. Incorrect. The policy is not voided; the benefit is adjusted.
Misstatement of Age or Sex Provision
A life insurance policy provision that allows the insurer to adjust the death benefit (or annuity payments) to what the premium paid would have purchased at the insured's (or annuitant's) correct age or sex.
- Policy is not voided due to misstatement.
- Benefit is adjusted, not premiums.
- If older than stated, death benefit decreases.
- If younger than stated, death benefit increases.
Memory trick: Misstated Age: Adjust the Amount, Not the Policy