What is conversion privilege in a term life insurance policy?

What is conversion privilege in a term life insurance policy?

• A. The right to convert a term policy to a whole policy without increasing premiums
• B. The option to convert a term policy to a permanent policy without evidence of insurability
• C. The ability to convert death benefits into cash payouts during the policy term
• D. The right to convert a whole life policy to a term policy at any time

Answer: (B)

Conversion privilege in a term life insurance policy primarily refers to the ability of the policyholder to convert their term policy into a permanent policy, such as whole life insurance, without the need for evidence of insurability. This means that the insurer cannot require the policyholder to undergo additional medical examinations nor provide proof of good health when making this change. This feature is valuable because it provides the policyholder with an option to secure lifelong coverage even if their health status has changed over time, which could affect their ability to purchase a new policy or the premiums they would be charged. This conversion feature is especially important as it ensures that individuals can maintain coverage as they age or if their health declines, which might otherwise limit their insurance options. It is a key benefit for term policyholders who may want the security of permanent insurance later in life, as it provides them with flexibility and peace of mind. The other options do not accurately describe the conversion privilege associated with term life insurance. For example, converting a term policy without increasing premiums is generally not guaranteed, and the right to cash out death benefits or convert a whole life policy to term does not align with the established definition of conversion privilege in this context.

Conversion privilege in a term life insurance policy primarily refers to the ability of the policyholder to convert their term policy into a permanent policy, such as whole life insurance, without the need for evidence of insurability. This means that the insurer cannot require the policyholder to undergo additional medical examinations nor provide proof of good health when making this change. This feature is valuable because it provides the policyholder with an option to secure lifelong coverage even if their health status has changed over time, which could affect their ability to purchase a new policy or the premiums they would be charged.

This conversion feature is especially important as it ensures that individuals can maintain coverage as they age or if their health declines, which might otherwise limit their insurance options. It is a key benefit for term policyholders who may want the security of permanent insurance later in life, as it provides them with flexibility and peace of mind.

The other options do not accurately describe the conversion privilege associated with term life insurance. For example, converting a term policy without increasing premiums is generally not guaranteed, and the right to cash out death benefits or convert a whole life policy to term does not align with the established definition of conversion privilege in this context.