An insured states her age as 40 on the application. When she dies, the insurer discovers that she was actually only 37 at the time of application. What will the insurance company do?
a) pays nothing since there was a material misrepresentation on the application
b) pays the death benefit in the amount that the premium at the correct age would have purchased
c) pays a decreased death benefit
d) adjust premiums to reflex correct age

According to the question, an insured states her age as 40 on the application and upon her death, the insurer discovers that the insured was 37 at the time of application.

The right thing for the insurance company to do is to pay the death benefit which in entitled to the insured in the amount which the premium at the correct age would have been bought. If insured overstates his or her age, the insurer will have to pay the full death benefit and then refund excess premiums paid.