Incontestability, Age, and a Reinstatement
Rashid applied in February 2023 for a $500,000 20-year term policy and listed his birth year as 1978 (age 45). He was actually born in 1974; at his true age the annual premium would have been $1,340 instead of the $1,150 he was charged. The policy was issued March 1, 2023. He paid through September 2024, missed the October premium, and the policy lapsed in November 2024. In January 2025 the insurer reinstated it after evidence of insurability and payment of the overdue premium with interest. Rashid died by suicide in July 2025. His adult daughter is the named beneficiary. The policy contains a two-year suicide clause, a two-year incontestability clause, a misstatement-of-age provision, and a reinstatement provision.
1. How does the age misstatement affect what the insurer pays? Show the arithmetic and explain why incontestability does not block the adjustment.
Read the worked answer
The misstatement-of-age provision adjusts the benefit, it does not void the policy. The standard formula: pay the amount the premium actually paid would have purchased at the correct age.
- Premium ratio: $1,150 ÷ $1,340 ≈ 0.858
- Adjusted face: $500,000 × 0.858 ≈ $429,000 (the insurer may instead refund the premium shortfall with interest and pay the adjusted amount - same economics)
Why incontestability does not block it: incontestability bars the insurer from rescinding the policy for a misstatement in the application after two years. The age provision is a separate, continuing contract term that the parties agreed would operate whenever the age is wrong - it adjusts rather than contests. Most policies and many state statutes expressly carve age misstatement out of the incontestable period; some jurisdictions limit the adjustment to a stated window, so verify the Wyoming rule and read the provision as written.
Practical point: the gap is worth about $71,000 to the beneficiary. Check the application, the policy data page, and the death certificate against each other before filing the claim - insurers apply this provision only when someone notices.
2. Does the suicide exclusion bar payment? Death is 28 months after issue but only 6 months after reinstatement. Reason both ways and state what controls.
Read the worked answer
The clause is a contract term, and the answer turns on the date it measures from.
Reading A - measured from the original policy date. The two years ran March 1, 2025. Death in July 2025 falls outside the exclusion, so suicide is treated as any other cause of death and the (age-adjusted) face is payable.
Reading B - measured from reinstatement. Reinstatement commonly restores the policy with fresh limitation periods, because the insurer took on a new risk after a lapse and new evidence of insurability. If the reinstatement provision restarts the suicide clause from January 2025, death six months later is inside the exclusion, and the remedy is return of premiums paid (frequently with interest), not the face amount.
What controls, in order:
- The exact wording of the reinstatement provision and the suicide clause - does either say the period runs from the date of reinstatement?
- The reinstatement approval letter, which usually states which periods restart.
- The Wyoming statute or Insurance Department position on restarting the suicide clause at reinstatement; a few states prohibit it.
Do not guess. Read the form. Note also that the evidence-of-insurability requirement addresses the insurer's risk selection; it says nothing about which limitation periods restart.
3. Suppose the insurer discovered the age error in August 2023, inside the contestable period. What are its options, and does the timing of a death change the analysis?
Read the worked answer
Options inside the contestable period:
- Rescind for material misrepresentation (refund premium) - but an age error is usually handled by the age clause, not rescission, because the insurer would have issued the policy anyway, just at a higher rate. Rescission generally requires that the misstatement be material to the underwriting decision.
- Adjust the face to what $1,150 buys at age 49 (about $429,000).
- Reprice: keep $500,000 and collect the $190 annual shortfall with interest, often retroactively.
What it cannot do is keep the premium and silently pay a smaller amount without applying the contractual formula, or cancel without returning premium.
Does death timing change it? Not the arithmetic. If death occurs inside the two years, the same age-adjustment formula applies - a standard-risk applicant misstating age has not given the insurer grounds to deny entirely. The practical difference is that after two years the insurer is limited to the age adjustment and cannot reach any other misstatement in the application, so the beneficiary's recovery is more predictable. Flag for the client: the adjustment survives forever; the rescission right does not.