What action will an insurer take if an insured intentionally understates her age on her application for a life policy?

If an insured intentionally understates her age on her application for a life insurance policy, the insurer typically chooses to pay a reduced death benefit. This action is generally based on the principle of equitable adjustment, where the insurance company calculates what the premiums would have been if the correct age had been provided.

In life insurance, the premium rates are closely tied to the age of the insured; older individuals generally pay higher premiums due to the increased risk of mortality. Therefore, if the insured misrepresents her age, the insurer will adjust the death benefit accordingly, reflecting the amount of premia that would have been charged had the correct age been disclosed. This means that, upon death, the insurer would only pay out a benefit that aligns with the premiums that were actually paid based on the misstated age.

This approach provides a fair resolution for both parties; the insured continues to hold a policy, albeit with a benefit that reflects the initial misrepresentation, while the insurer mitigates its risk exposure by limiting payout based on the accurate assessment of the insured’s age.