Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceMedium
An individual is covered under a group life insurance policy provided by their employer. If they terminate employment, which provision allows them to convert their group coverage to an individual policy without providing proof of insurability?
- AConversion Privilege
- BIncontestability Clause
- CGrace Period Provision
- DReinstatement Provision
Show answer & explanationAnswer & explanation
Correct answer: A. Conversion Privilege
The Conversion Privilege in a group life insurance policy allows an employee to convert their group coverage to an individual permanent life insurance policy within a specified timeframe (typically 31 days) after leaving the group, without having to prove insurability.
Why the other options are wrong
- B. The Incontestability Clause prevents the insurer from denying claims based on misstatements after a certain period, not related to conversion.
- C. A grace period allows a policyowner extra time to pay a premium before the policy lapses, unrelated to converting group coverage.
- D. Reinstatement allows a lapsed individual policy to be put back in force, not for converting group to individual.
Group Life Conversion Privilege
A provision in group life insurance that allows an individual to convert their group coverage to an individual permanent life insurance policy upon termination of employment, without evidence of insurability.
- Must be exercised within a limited timeframe (e.g., 31 days)
- No proof of insurability required
- The new policy is usually a whole life policy at standard rates for the attained age
- Ensures continuous coverage for the departing employee
Memory trick: Leaving the group? 'Convert' your coverage, no questions asked.