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If the age of an insured under a life insurance policy is misstated, which of the following is CORRECT concerning the death benefit amount?

Rationale

The amount paid will be what the premium would have purchased at the correct age.

When an insured’s age is misstated in a life insurance policy, the insurer adjusts the death benefit based on the premiums that would have been paid if the correct age had been disclosed. This ensures that the payout reflects the risk associated with the insured's actual age, maintaining fairness in the insurance contract.

A (The amount of the death benefit will be paid to the insured) YOUR ANSWER

This choice is incorrect because, even with a misstated age, a death benefit is still payable. Most life insurance policies contain provisions that adjust the benefit rather than voiding it entirely due to clerical errors in age reporting.

B (The amount indicated in the policy will be paid to the beneficiary) YOUR ANSWER

This option misrepresents the insurer's obligation. The stated amount in the policy is based on the premiums calculated at the insured's misreported age, not the actual age. Therefore, the insurer will not simply pay the amount indicated in the policy without adjustment.

D (The amount paid will be reduced by the unearned dividend reserve) YOUR ANSWER

This statement is misleading as it suggests a specific reduction mechanism not typically applied in cases of age misstatement. The adjustment is based on what the premium would have purchased at the correct age, not on any dividend reserves, which would only apply in specific policy types or circumstances.

Conclusion

In cases where the insured's age is misstated, life insurers will adjust the death benefit to reflect what the premiums would have purchased at the correct age. This approach balances the insurer's risk and the policyholder's coverage, ensuring a fair outcome that respects the principles of actuarial science and underwriting practices.

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