South Carolina Life and Health Practice Exam

What must insurers do under the Misstatement of Age provision when an age error is discovered?

1. Adjust benefits to the correct age

2. Issue a refund

3. Revise the insurance plan

4. Cancel the policy

The correct answer is: Adjust benefits to the correct age

When an age error is discovered under the Misstatement of Age provision, insurers are required to adjust benefits to reflect the correct age of the insured. This provision acknowledges that accurate age information is crucial for determining premiums and benefits in life and health insurance policies. If an insured's age is misstated at the time of application, the insurer will recalculate the benefits based on what the premiums would have been if the correct age had been reported. For example, if a policyholder is found to be older than originally stated, benefits may be decreased accordingly, as premiums typically vary with age. Conversely, if the individual is younger than reported, benefits may increase, but the insurer will still apply the policy according to how it would have been issued based on the correct information. This approach ensures that insurance companies can manage their risk appropriately while also adhering to fair practices for policyholders.