4. Which of the following is TRUE concerning the conversion of group life insurance coverage to an individual policy?
Answer: C
An insurer cannot require evidence of insurability before issuing a conversion policy.
When converting group life insurance coverage to an individual policy, it is true that an insurer cannot require evidence of insurability. This provision is designed to ensure that individuals can maintain their coverage without undergoing additional medical evaluations.
A) It applies whenever life insurance coverage terminates.
This statement is incorrect because the right to convert group life insurance to an individual policy specifically applies under certain conditions, such as termination of employment or loss of eligibility, rather than applying universally whenever coverage terminates.
B) The insured receives a paid-up conversion policy upon termination of employment unless he or she informs the insurer otherwise.
This option is misleading; while there may be rights to convert coverage, the insured does not automatically receive a paid-up policy. Typically, a conversion policy requires the insured to apply and pay premiums to maintain coverage.
C) An insurer cannot require evidence of insurability before issuing a conversion policy.
This statement is correct. Under conversion provisions, individuals are allowed to convert their group coverage to an individual policy without needing to provide evidence of insurability, ensuring continuity of coverage regardless of health status.
D) The premiums under the conversion policy will be the same.
This is inaccurate because premiums for a conversion policy are typically higher than those for group coverage. The rates are based on individual risk factors and may not reflect the lower risk pool of the group plan.
Conclusion
The correct answer, stating that an insurer cannot require evidence of insurability before issuing a conversion policy, is essential for ensuring that individuals maintain their life insurance coverage without additional barriers. All other options fail to accurately represent the conversion process or misstate the conditions and outcomes associated with converting group life insurance to an individual policy.