Question

"The Misstatement of Age provision requires that if the age of the insured is misstated, then any amount payable is?"

a) The original face amount

b) Double the face amount

c) The cash value of the policy

d) The reduced face amount

Answer 1

d) The reduced face amount

The Misstatement of Age provision results in the benefits being adjusted to the reduced face amount, which reflects the actual premiums paid for the insured's correct age.

Step-by-step explanation:

The Misstatement of Age provision in life insurance policies indicates that if the insured's age is misstated, the amount payable upon a claim will be the amount that the premiums paid would have purchased at the correct age. Therefore, the correct answer is d) The reduced face amount.

This means the benefits will be adjusted to reflect what the actual premiums would have bought if the insured's age had been stated accurately.

Charging a single, actuarially fair premium to the entire group might result in adverse selection, where individuals at higher risk are more likely to purchase the insurance, potentially leading to losses for the insurance company.