Long Term Care Certification Practice Test

If an insured incorrectly states their marital status on their application, what action can the insurance company take after discovering the error?

1. Cancel the policy

2. Adjust the premium rate

3. Rewrite the policy

4. Refuse to provide benefits

The correct answer is: Rewrite the policy

In the context of misrepresentation of marital status on an insurance application, the insurance company has options regarding how to handle the situation. The action of rewriting the policy reflects a common approach to address discrepancies in the application process. This option allows the insurer to reassess the risk associated with the policyholder based on the accurate marital status and to adjust the terms of the policy accordingly. When an insured person provides incorrect information, such as marital status, it may influence factors such as risk assessment and premium calculations. By rewriting the policy, the insurance company can ensure that all terms and provisions of the policy align accurately with the policyholder’s true circumstances. This may involve updating premium rates and adjusting coverage limits based on the newly provided information. The other options, while possible actions an insurance company might consider, may not necessarily reflect the most common or appropriate immediate response. For example, canceling the policy may not be warranted if the misrepresentation is not material to the underwriting process. Similarly, adjusting the premium rate or refusing benefits might be viewed as overly punitive without first correcting the policy to reflect the true situation. Therefore, rewriting the policy offers a practical and fair resolution to the error in marital status.