16. Which of the following is a characteristic of conversion from group to permanent life insurance?
Answer: A
Premium for the new policy will be based on the age when first covered by the group policy.
When converting from group to permanent life insurance, the premium for the new policy is determined based on the insured's age at the time they were first covered by the group policy.
A) Premium for the new policy will be based on the age when first covered by the group policy.
This option is correct because, during the conversion process, insurers typically use the insured's age at the onset of the group coverage to calculate premiums for the new permanent policy. This practice is standard in the industry and benefits the insured if they were younger when coverage began.
B) Conversion must be to term insurance.
This option is incorrect as the conversion typically allows for a transition to permanent life insurance rather than being restricted to term insurance. The nature of conversion is to provide the option for a more permanent form of coverage.
C) Proof of insurability is required.
This statement is also incorrect. One of the advantages of converting from group to permanent insurance is that proof of insurability is generally not required. This means that individuals can convert their coverage without undergoing additional medical underwriting.
D) Conversion must be applied for within 1 month of termination.
While there may be time limits regarding conversion, this specific statement is misleading. Generally, there is a period after termination during which the conversion must be completed, but it is not universally confined to just one month. The exact timeframe can vary by policy and insurer.
Conclusion
The correct answer, which states that the premium for the new policy will be based on the age when first covered by the group policy, accurately reflects the conversion process. In contrast, the other options either misrepresent the rules surrounding conversion or impose restrictions that do not apply. Thus, understanding the specific characteristics of converting group coverage to permanent insurance is essential for policyholders.