Minnesota Life Insurance License Practice Exam

What is the purpose of the conversion privilege in a group life insurance policy?

1. To increase coverage limits for dependents

2. To give the employee the right to convert their group coverage to an individual policy without proof of insurability

3. To allow for additional enrollment periods

4. To offer lower premiums for continued coverage

The correct answer is: To give the employee the right to convert their group coverage to an individual policy without proof of insurability

The conversion privilege in a group life insurance policy serves a significant purpose by allowing individuals covered under a group plan the opportunity to convert their group life insurance coverage into an individual policy without having to provide proof of insurability. This means that if an employee leaves the group plan due to job changes, retirement, or other circumstances, they still have the option to maintain coverage without undergoing the typical underwriting process, which may involve medical exams or health questionnaires. This provides a crucial benefit because it helps ensure that individuals can secure life insurance even if their health status has changed since they initially obtained group coverage. The absence of proof of insurability is particularly important for those who may have developed health issues, thus enhancing financial security for themselves and their beneficiaries. The other options do not accurately reflect the main objective of the conversion privilege, which is centered around the right to maintain insurance coverage independently rather than focusing on dependent coverage limits, additional enrollment periods, or premium reductions.