Question

Minnie buys a whole life insurance on August 1, 1995. Minnie names her best friend, Pluto, as her primary beneficiary. She has paid the yearly premium of $1,533 every year. But Minnie, who likes to think she is still young, stated on the application that she was 35 instead of 45. If Minnie passes away on September 7, 2011, what will the insurance company do when they find out that Minnie is 57 instead of 47?

O Pay Pluto the full death benefit because the two year contestability period is past.

O Refuse to pay the death benefit because Minnie blatantly lied on her application.

O Pay Pluto the accrued premium plus interest due to misrepresentation.

O Adjust the death benefit to account for the actual age of Minnie, accounting for the premiums she paid.

O Transfer the policy to Pluto, as he is the primary beneficiary and becomes the insured if the policy is contested.

O None of the above.

Answer 1

The insurance company will likely adjust the death benefit to reflect Minnie's actual age at the time of application since the contestability period has expired.

Step-by-step explanation:

When an insurance company discovers a policyholder has misrepresented their age on an insurance application, typically, the insurer has the right to adjust the death benefit to what the premiums would have purchased at the correct age. Given that the contestability period, which is usually two years, is past, they cannot simply refuse to pay the death benefit on this ground. Therefore, in the case of Minnie, the insurance company will likely adjust the death benefit to account for Minnie's actual age at the time of her application, based on the premiums she paid.

Answer 2

The insurance company will likely adjust the death benefit to reflect Minnie's actual age at the time of application since the contestability period has expired.

Step-by-step explanation:

When an insurance company discovers a policyholder has misrepresented their age on an insurance application, typically, the insurer has the right to adjust the death benefit to what the premiums would have purchased at the correct age. Given that the contestability period, which is usually two years, is past, they cannot simply refuse to pay the death benefit on this ground. Therefore, in the case of Minnie, the insurance company will likely adjust the death benefit to account for Minnie's actual age at the time of her application, based on the premiums she paid.