California Life and Health Insurance Practice Exam

When an insured provides the wrong age at the time of application, the insurance company typically has the option to adjust benefits. This action aligns with the principle of equitable treatment in insurance. If a policyholder misstates their age, the premiums they are charged may not correspond to the risk profile that their actual age represents.

While the insurer could potentially void the policy, this action is more severe and may not be justified if the intent wasn’t to deceive. Instead, adjusting benefits allows the insurer to rectify the discrepancy between the premiums paid and the risk associated with the insured’s actual age. For example, if the insured is older than they originally stated, the insurer may lower the benefits accordingly because the premiums collected do not accurately reflect the increase in risk.

Increasing premiums might also be a consideration, but it does not address the immediate need to align the benefits with the insured's situation, which is why benefits adjustment is often the preferred route. Offering a rebate is less common and typically would not solve the fundamental issue of policy alignment with the insured's risk.