If the insured's age was misstated on a life policy and the insured dies, how is the death benefit determined?

• A. The full face amount
• B. A prorated amount based on the incorrect age
• C. A prorated death benefit based on the amount of insurance the premiums would have purchased at the correct age
• D. The premiums refunded

Answer: (C)

When age is misstated on a life insurance policy, the payout is adjusted to reflect what the premiums actually paid would have bought at the insured’s true age. In other words, the death benefit is the amount of coverage those premiums would purchase if the age were correctly stated. This prevents paying more or less than what the premiums cover based on the true age.

For example, if the policy’s face amount is $100,000 but, with the correct age in mind, those premiums would only buy $60,000 of coverage, the death benefit would be $60,000. It’s not the full face amount, and it’s not determined by the incorrect age or by refunding premiums.

That’s why the best answer describes a prorated death benefit based on the amount of insurance the premiums would have purchased at the correct age.