PSI Life Exam Practice Test

When an insured's age is misstated, the insurer's liability upon the insured's death is to pay a prorated amount based on the correct age premiums. This means that if the age stated on the application is incorrect, the insurer will not simply deny the claim or void the policy outright. Instead, they will adjust the death benefit according to what the premiums would have been if the correct age had been disclosed at the onset. This approach ensures that the insured receives a benefit proportional to the premiums that should have been paid had the correct age been known. For instance, a policyholder who overstated their age might have paid lower premiums, thus their coverage would have been lower than what the policy originally indicated. In this situation, the insurer calculates what the premiums would have been based on the correct age and pays benefits accordingly. This method emphasizes fairness and respects the contractual agreements established at the inception of the insurance policy, acknowledging that while there was a discrepancy, the insured was still entitled to some form of benefit.