What can insurance companies do in case of a misstatement of age?

In the case of a misstatement of age, insurance companies have the authority to adjust the face amount of the policy according to the correct age and premium. This adjustment reflects an accurate assessment of risk based on the insured's true age, which plays a critical role in determining both the premium and the benefit amount at the time of the policy’s issuance.

When a policyholder misstates their age, the insurer often recalibrates the benefits of the policy to fit the actuarial data relevant to the insured's actual age. For instance, if an individual has understated their age, the insurer will likely reduce the policy's face amount to align with what the premium paid would have bought for someone of that correct age.

The approach of adjusting the face amount rather than canceling the policy or simply altering the premium ensures that both the insurer and the policyholder maintain a fair agreement based on accurate information. This process helps uphold the integrity of the insurance contract while also protecting the company from significant financial exposure resulting from inaccurate age information.