“Misstatement of age” refers to the incorrect reporting or documentation of an insured individual’s age at the time of applying for an insurance policy. This discrepancy can occur unintentionally due to simple errors or oversight, or it can be a deliberate attempt to secure more favourable insurance terms or premiums. Age is a critical factor in determining the risk profile, coverage eligibility, and premium rates for various types of insurance, including life, health, and annuity policies.
Consequences and handling of a misstatement of age include:
Adjustment of benefits or premiums
If a misstatement of age is discovered, the amount of life insurance is increased or decreased to what the same premium would have bought at the correct age; this is set by the provincial insurance acts, and Quebec’s Civil Code has a similar rule. For accident and sickness insurance, such as disability insurance, the insurer may instead adjust the premium to the correct age. For example, if the insured’s actual age is higher than initially stated, the policy benefits are reduced. Group policies follow their own terms on age.
Policy recalculation
The insurer may recalculate the policy terms based on the accurate age, which could involve revising the death benefit in a life insurance policy or adjusting the annuity payout amounts.
Policy voidance
If the correct age was above the insurer’s age limit for the coverage when the application was made, the insurer may void a life insurance contract, but generally only within five years after it takes effect (three years in Quebec), while the insured is alive, and within 60 days after discovering the error.
Claim adjustment
If a claim is filed and the insurer discovers a misstatement of age, the benefit paid is adjusted based on the correct age at the time of policy issuance rather than the claim being denied. Where coverage starts or ends at a set age, the correct age decides whether the coverage was still in effect.
Legal and contractual provisions
Insurance policies typically include clauses that specify the insurer’s rights and procedures in the event of a misstatement of age, ensuring that both parties understand the potential implications and remedies.