How does the insurance company decide to adjust a death benefit due to age misstatement?

The situation involving a misstatement of age is a common issue in life insurance policies. When an insured's age is misstated, the insurance company generally adjusts the death benefit based on the correct age rather than maintaining the originally agreed-upon amount.

This adjustment is grounded in the concept of actuarial fairness, which underpins insurance underwriting. The premiums for a life insurance policy are directly tied to the lifespan and risk factors associated with the insured's age. If a policyholder incorrectly states their age, it can lead to either an underpayment or an overpayment of premiums based on the actual risk that the insurer assumed.

By adjusting the death benefit to reflect what the insured could have obtained had they stated their correct age, the insurance company ensures that the benefits provided align with the true risk level associated with that age group. This means that the death benefit will be recalculated to match the coverage that would have been offered for the correct age at the time the policy was issued, which is both fair to the insurer and the beneficiaries.

Thus, in instances of age misstatement, the death benefit is not left unchanged or determined arbitrarily, but recalibrated to maintain the integrity of the policy’s terms and the equity of the insurance system.