Which clause allows insurers to adjust benefits based on policyholder’s age?

The correct choice is the misstatement of age clause. This clause is essential in life and health insurance policies as it addresses the implications that may arise if a policyholder inaccurately reports their age when applying for insurance.

If a policyholder's age is misstated, the insurer is allowed to adjust the benefits payable under the policy. For example, if the policyholder is younger than they stated, the insurer might issue a policy with lower premiums but subsequently, upon discovering the true age, could reduce the benefit amount to align it with the appropriate premiums that would have been charged for the correct age. This ensures that both the insurer and the policyholder are protected, as the insurer doesn't end up paying out more than is warranted based on the true age of the insured.

In contrast, the other clauses mentioned do not pertain to age adjustments in benefits. The suicide clause deals with exclusions regarding death by suicide within a certain period. The grace period clause provides a window for policyholders to pay their premiums without losing coverage. The incontestability clause reinforces the insurance company's obligation to honor the policy after it has been in force for a specified period, regardless of any misstatements made during the application process.