Difficulty: Medium

Average Score: 50%

Which of the following is TRUE concerning the conversion of group life insurance coverage to an individual policy?

Rationale

An insurer cannot require evidence of insurability before issuing a conversion policy.

When converting group life insurance to an individual policy, the insurer is obligated to issue the conversion policy without requiring the insured to provide evidence of insurability. This ensures that individuals can maintain their life insurance coverage without undergoing additional health assessments following the loss of their group coverage.

A (It applies whenever life insurance coverage terminates.) YOUR ANSWER

This statement is inaccurate because the option to convert group life insurance to an individual policy typically applies only under specific circumstances, such as termination of employment or when the group policy ends, rather than whenever life insurance coverage terminates.

B (The insured receives a paid-up conversion policy upon termination of employment unless he or she informs the insurer otherwise.) YOUR ANSWER

This option is misleading because the conversion policy is not automatically a paid-up policy. Instead, the insured must typically pay premiums for the new individual policy, and it does not become paid-up simply due to the conversion process.

D (The premiums under the conversion policy will be the same.) YOUR ANSWER

This statement is incorrect because the premiums for the individual conversion policy are usually higher than those for the group policy. Factors like the insured's age and health at the time of conversion can result in increased costs compared to the original group coverage.

Conclusion

In summary, when converting from group life insurance to an individual policy, it is true that the insurer cannot require evidence of insurability, allowing individuals to secure coverage without additional health requirements. The other options misinterpret the conditions and implications of such conversions, emphasizing the importance of understanding the nuances in insurance policy transitions.

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