Three years after issue, the insurer discovers that a California insured misstated her age on the application by 5 years (claimed 45, actually 50). She has just died. What is the insurer's CORRECT response under California law?

Why this is the answer

This problem turns on the interplay between TWO CA statutes. Under Ins. Code § 10113.5, after 2 years the insurer cannot contest the policy for misrepresentation (incontestability). But misstatement of age is treated as a special category: under Ins. Code § 10369.3 the insurer pays whatever amount of insurance the paid premiums would have purchased at the insured's correct age, regardless of how much time has passed. Because the insured was actually 5 years older, the premium paid for a 45-year-old buys less insurance for a 50-year-old, so the death benefit is reduced proportionally. (a) is wrong because the policy is incontestable. (b) is wrong because no rescission/refund is allowed. (d) is wrong because § 10369.3 specifically permits the adjustment.