19. A person insured under a Whole Life policy dies at age 50. The insurance company learns that the insured was three years older than the insured indicated on the application. Which of the following statements is CORRECT about this situation?
Answer: C
The death benefit will be adjusted appropriately.
In this case, since the insured misrepresented their age on the application, the insurance company has the right to adjust the death benefit based on the insured's actual age at the time of death.
A) The company may void the policy completely.
This option is incorrect because while the insurance company may have grounds to void the policy due to misrepresentation, this action is not mandatory. Typically, insurers adjust the benefits rather than voiding the policy entirely, especially when the insured has passed away.
B) The beneficiary may have to sue to receive the full death benefit.
This statement is misleading. While legal action may be necessary in some cases of disputed claims, in this scenario, the insurance company is likely to adjust the death benefit based on the insured's actual age rather than requiring a lawsuit for the full amount.
C) The death benefit will be adjusted appropriately.
This option is correct. Insurance companies commonly adjust the death benefit based on the actual age of the insured at the time of death, which reflects the risk associated with the age misrepresentation. This is a standard practice to ensure fairness based on the insured's true age.
D) Only the face amount of the base policy will be paid.
This option is incorrect because it implies that the death benefit would be limited to the face amount without considering the adjustment based on age. The insurance company typically adjusts the benefit according to their underwriting guidelines related to the actual age of the insured.
Conclusion
The correct answer is that the death benefit will be adjusted appropriately to align with the insured's actual age. Other options either misrepresent the insurance company's typical practices or suggest actions that are not necessary under the circumstances. Adjusting the death benefit reflects the insurer's commitment to equitable treatment in cases of age misrepresentation.