Minnesota Life Insurance License Practice Exam

What option does a convertible term policy provide to its owner?

1. Change the payment terms

2. Convert to a permanent policy

3. Extend the term period

4. Increase the coverage amount

The correct answer is: Convert to a permanent policy

A convertible term policy provides the owner with the option to convert their existing term life insurance policy into a permanent life insurance policy, such as whole life or universal life, without needing to provide evidence of insurability. This feature is particularly valuable because it allows policyholders who may develop health issues during the term period the ability to secure lifelong coverage even if their health status changes negatively. The conversion option means the policyholder can lock in the insurability they had at the inception of the term policy, thus ensuring they maintain coverage well into the future if they choose. This flexibility can be crucial for individuals as their life circumstances evolve, providing peace of mind regarding long-term financial security and protection for their beneficiaries. This feature distinguishes convertible term policies from other types of policies, making them an attractive option for many insured individuals who are looking for both affordability in the short run and security in the long run.