Final answer:
When an insured individual misstates their age and pays a lower premium than required, the insurance company will adjust the death benefit according to the proportion of the premium paid. For Jerry, who paid 12/15th of the correct amount, the insurance company will provide 12/15th of the policy's face amount as the death benefit.
Step-by-step explanation:
If Jerry, an insured individual, understated his age on his life insurance application, resulting in a lower premium payment than what he should have paid, the insurance company will typically adjust the death benefit in proportion to the premiums that were paid. Because Jerry paid $12 per $1,000 of insurance instead of the correct amount of $15 per $1,000, the adjusted death benefit will be calculated based on the proportion of the premium he actually paid to what he should have paid.
In this case, since Jerry paid $12 but should have paid $15, he paid 12/15 (or 4/5) of the correct premium. Therefore, if he dies, the death benefit would likely be adjusted to 12/15th of the policy's face amount, reflecting the ratio of the premium actually paid to the premium that should have been paid. This comes down to a simple mathematical adjustment based on the premiums.