16. 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 group life insurance coverage terminates, the insured is entitled to convert their policy to an individual one without the insurer requiring evidence of insurability. This provision ensures that individuals can maintain life insurance coverage regardless of their health status at the time of conversion.
A) It applies whenever life insurance coverage terminates.
This statement is incorrect because the conversion option specifically pertains to the termination of group life insurance coverage, not to all types of life insurance. The rules governing conversion may vary based on the type of policy and the terms set forth by the insurer.
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. In most cases, the insured does not automatically receive a paid-up policy; rather, they are given the option to convert to an individual policy. The specifics of the conversion, including premium payments, depend on the terms established by the insurer.
C) An insurer cannot require evidence of insurability before issuing a conversion policy.
This statement is true. Regulations typically mandate that insurers cannot impose evidence of insurability requirements for individuals converting from group to individual policies, allowing for continued coverage regardless of changes in health.
D) The premiums under the conversion policy will be the same.
This statement is incorrect. Premiums for the converted individual policy are likely to differ from those of the group policy, as they are based on individual risk factors rather than the group’s collective risk.
Conclusion
The correct answer, C, accurately reflects the legal protections afforded to individuals converting group life insurance policies to individual ones, ensuring they are not discriminated against based on health when seeking to maintain coverage. Options A, B, and D present inaccuracies regarding the nature of conversion policies and their implications, making them incorrect in this context.