Misstatement Of Age Or Sex

Under the misstatement of age provision, if the insured's age was understated, the death benefit is:

1. A.Denied entirelyAn age error is treated as a correctable pricing problem, not grounds for rescission. Denial is reserved for material misrepresentation, and this provision exists specifically to avoid that result.
2. B.Paid in full with no changeThis ignores the adjustment the provision calls for. Understating age means the insured paid too little for the coverage, so the benefit is trimmed to what those premiums would actually have purchased.
3. C.DoubledThis runs the adjustment backwards. An understated age produced a premium that was too low, so the benefit moves down rather than up.
4. D.Adjusted to what the premium would have bought at the correct ageCorrect - benefit is recalculated, not voided.

Why: The benefit is adjusted to what the premium actually paid would have purchased at the correct age.

Colette applied at stated age 52 but was actually 48. She dies eight years later and the insurer discovers the error. Under the standard MISSTATEMENT OF AGE provision, the death benefit will be:

1. A.Paid in full at the face amount, because the incontestable clause bars any adjustment once that period has runMisstatement of age survives the incontestable period. It is an adjustment provision, not a contest of the policy.
2. B.Paid in full, with the excess premiums plus interest refunded to the beneficiary as a separate paymentThe provision adjusts the benefit amount rather than refunding premium.
3. C.Increased to the amount her actual premium would have purchased at her true age of 48Correct. She overpaid for her real age, so the same premium buys a larger benefit. The adjustment corrects the pricing error in her favor.
4. D.Reduced to the amount her premium would have purchased at age 52This applies the usual understatement outcome without noticing the direction. She was younger, not older, than stated.

Why: The provision adjusts the death benefit to what the premium actually paid would have purchased at the CORRECT age. Because Colette overstated her age, she was charged too much, and the premium she paid buys MORE coverage at her true younger age. So the benefit is increased. The provision runs in both directions and is not limited by the contestable period. The clue is that the stated age was HIGHER than the true age.

Marisol's application understated her age by four years. Her 200,000-dollar policy charged 1,320 dollars a year, but the annual premium at her true age would have been 1,650 dollars. She dies with a 28,000-dollar policy loan outstanding. What does her beneficiary receive?

1. A.137,600 dollarsThis subtracts the loan first and then applies the ratio. The debt is not part of the coverage being repriced, so the sequence is wrong.
2. B.160,000 dollarsThis performs the age adjustment correctly but forgets that outstanding policy debt is deducted from the death benefit.
3. C.172,000 dollarsThis deducts the loan but ignores the age misstatement entirely.
4. D.132,000 dollarsCorrect. 160,000 dollars of adjusted benefit less the 28,000-dollar loan.

Why: The misstatement-of-age provision adjusts the death benefit to the amount the premium actually paid would have purchased at the true age: 200,000 x (1,320 / 1,650) = 200,000 x 0.80 = 160,000 dollars. Policy debt is then deducted from that adjusted benefit, leaving 160,000 - 28,000 = 132,000 dollars. Order matters: the age adjustment reshapes the coverage, and the loan is repaid out of whatever coverage exists. The clue is that both an age misstatement and a loan are present.