Under what condition may a life insurance company pay a death claim for less than the face amount of a policy?

A life insurance company may pay a death claim for less than the face amount of a policy based on specific conditions, each of which can affect the amount payable upon the insured's death.

When there is a misrepresentation on the application, the insurer has the right to adjust the death benefit. If the misrepresentation is found to be material—that is, if it influenced the underwriting process—this could lead to a reduced claim amount.

In cases where the insured's age was misstated, life insurance policies are often contingent on the insured's age at the time of application. If a policyholder's age was misrepresented, the payout could be recalculated based on the correct age, which could lead to a lower benefit amount than initially expected. Insurance premiums and benefits may be adjusted accordingly to reflect the risk associated with the true age of the insured.

Non-payment of premium can also affect the payment of a claim. If premiums haven’t been paid and the policy is no longer in force at the time of the insured's death, the company may only pay the amount that reflects any coverage that remained active or may even deny the claim altogether.

Due to these various conditions, all leading to the potential for a life insurance company to pay a death claim for