Practice Quiz

Health and Life Insurance

Category - Annuities & Policies

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Enrique purchased a life insurance policy when he was 45 years old indicating his 50 year old wife as the sole beneficiary of his policy. When the insurer recorded the information he switched their ages. An audit of the files 10 years later reveals this mistake. What happens to Enrique’s life insurance policy?
  1. Nothing happens; the fault lies with the insurer and will be adjusted from the surplus funds.
  2. Enrique’s policy becomes void. He should have made sure the insurer correctly noted the ages.
  3. The future premiums are adjusted to correct this mistake.
  4. Because the mistake was not noticed for 10 years, the policy legally cannot change.
Explanation
Answer: C - The future premiums for Enrique’s policy will be adjusted to correct the mistake. Because Enrique’s age was listed as older than his actual age, he was paying higher premiums. Enrique will be credited the difference as well as the interest on back payments that were made prior to the audit.
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