Misstatement of Age/Sex ***

• company can make an adjustment at ANY time
• if misstatement found after death, they adjust the benefit
• if misstatement found after death, they adjust the premium

MR. WATSON: Age /sex will affect the cost of insurance. Women usually pay less for life insurance. What if someone lies about their age or sex? They're trying to get a cheaper premium. Or if it was just a simple mistake?

MR. WATSON: Six months after the insurance company issues the policy, the insured dies. During the autopsy, we go “rut-ro”, lady is a dude? What are we going to do?

STUDENTS: Cancel the policy?

MR. WATSON: No. Wrong.

MAN: Adjust the benefit.

MR. WATSON: My man! We are going to lower the benefit down to whatever his current premium would have bought, had we known the correct age and sex.

MAN: Even under misrepresentation?

MR. WATSON: We can only deny a claim if he lied about a material fact. Age and sex (gender) are not material facts. They simply affect premium.

WOMAN: Like knowing he had cancer and lying?

MR. WATSON: What if he knew he had cancer and he answered, no, I do not have cancer? Then we would void the policy & refund the premiums, because that indeed is a material fact. We would not have issued the policy had we known this fact. Does that make sense?

STUDENTS: Yes.

MR. WATSON: No questions?

WOMAN: I have a question. How do you define "material fact"?

MR. WATSON: Hellooooo, I just did it! For those who were out in La La Land, I will go over it again. It's a fact that, had we known this fact, it could have altered our decision to issue or not to issue the policy. The company uses information to issue the policy. Examples: Drug abuse. Your health. If you are in bad health and lie about it, had we known the truth, would we have issued the policy?

WOMAN: No.

MR. WATSON: You understand? Maybe no; maybe so. But it's a fact that our decision to issue or not to issue hinges on. Do you agree?

WOMAN: Yes.

MR. WATSON: So your health is a material fact. Drug abuse, alcohol abuse, things like that. Understand?

MAN: Sex is not.

MR. WATSON: Sex is not. Right. Because we don't care whether you are a man or a woman. We'd issue it either way. Gender determines price.

MAN: Out of curiosity, what determines if it's a material fact or not? If I didn't know when I filled out the application.......

MR. WATSON: Hold on. If you didn't know you had cancer when you filled out the application, that's not fraud, is it? We are only denying based upon fraud.

MR. WATSON: Y'all know what fraud is? It's an intentional deceptive act. If you’ve got this big tube hanging out your neck, even though a doctor hasn't diagnosed it and you are coughing and this thing is hanging out like a balloon, a doctor doesn't have to tell you about it.

WOMAN: Preexisting condition -- is that basically what it says? Anything before?

MR. WATSON: Right, and only if you knew about it. Fraud is an intentional, deceptive act. Guys, if you don't know you have it, you are not committing fraud .

MR. WATSON: Like there she is sitting there smoking. She has a cigarette hanging out of her mouth.

MR. WATSON: "You smoke?"

MR. WATSON: "No."

MR. WATSON: "What the heck is that thing hanging out of your mouth?" She says she’s holding it for someone else.

MAN: Or she doesn't inhale.

MR. WATSON: Okay, Clinton. That is fraud. Intentional, deceptive acts.

(Laughter.)

WOMAN: What happens if it is something behavioral, like you smoking as an issue? Say somebody has quit smoking --

MR. WATSON: The question is: In the last year, or two years, have you used tobacco products? Guys, they cover it all. They talk about any and all tobacco. Some of you have a hookah pipe at home. That counts.

MAN: What if you pick up the habit again?

MR. WATSON: I’ll show you. Let me ask you a question: Do you do crack?

MAN: No.

MR. WATSON: Do you jump out of planes?

MAN: No.

MR. WATSON: After the policy is issued, he could put a parachute on, go up in a plane, on the way down hit the crack pipe, and the policy pays, the policy is already issued. Do you scuba dive?

MAN: No.

MR. WATSON: You could jump with a scuba tank strapped to your back, too.

(Laughter.)

MR. WATSON: The point is this: after the policy is issued, what you do after, unless it is specifically excluded by rider, will be covered. As long as he didn't do it before the policy was issued. In other words, there was no fraud. Companies deny claims because of fraud.

MR. WATSON: Let me tell you this. You can buy a policy, and two years later you commit suicide, the policy will pay.

WOMAN: I thought there were exceptions.

MR. WATSON: What did I just say? After two years, you can jump off the Skyway Bridge and before you hit, I will have a check for you.