27. An individual purchased a life insurance policy stating an age 10 years younger than the actual age. How much will the insurance company pay if the misstatement of age is discovered after the insured's death?
Answer: C
The insurance company will pay less than the face amount.
If the misstatement of age is discovered after the insured's death, the insurance company will pay less than the face amount of the policy. This is due to the fact that the premiums and coverage are calculated based on the insured's actual age.
A) The face amount
This option is incorrect because the insurance company does not pay the full face amount if the insured misstated their age. The payout is adjusted based on the actual age at the time of death, which would typically result in a lower payout.
B) More than the face amount
This option is incorrect as well. The insurance company would not pay more than the face amount because the policy is based on the insured's actual age; therefore, the payout cannot exceed what was initially agreed upon in the policy.
C) Less than the face amount
This option is correct. When a misstatement of age occurs, the insurance company will calculate the payout based on the actual age of the insured, which typically results in a benefit amount that is less than the original face amount of the policy.
D) The amount of premiums paid
This option is not correct because the insurance company does not simply return the premiums paid. Instead, they adjust the payout based on the actual risk associated with the insured’s real age, which usually results in a benefit that is less than the face amount rather than a straightforward refund of premiums.
Conclusion
The correct answer is that the insurance company will pay less than the face amount due to the misstatement of age affecting the risk assessment and premium calculations. All other options fail because they either suggest payouts that exceed the face amount or do not reflect the adjusted benefit based on the insured’s actual age.