Looking for the answer to the question below related to  Management ?

Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

 Options:

A) Owner’s Rights clause B) Incontestable Period C) Insuring Agreement D) Conversion privilege

The Correct Answer Is:

• D) Conversion privilege

A group Term Life insurance policy offers coverage to a group of individuals, typically through an employer or an association. One important feature of such policies is the conversion privilege, which allows an individual to leave the group and continue their insurance without having to provide evidence of insurability.

In this detailed explanation, we will delve into why option D) Conversion privilege is the correct answer and why the other options are not correct.

D) Conversion privilege:

The conversion privilege is a crucial feature of group Term Life insurance policies. It allows an insured individual to convert their group coverage into an individual life insurance policy, usually within a specified timeframe, without the need for a medical exam or providing evidence of insurability.

This feature is immensely beneficial because it ensures that individuals can maintain their life insurance coverage even if they leave the group, such as when they change jobs or retire.

It provides a seamless transition from group coverage to an individual policy, regardless of the individual’s health or medical condition at the time of conversion.

The conversion privilege typically comes with certain conditions and limitations, such as the requirement to apply for conversion within a specific timeframe after leaving the group (often within 30 or 31 days).

Additionally, the individual may have the option to choose from a range of available individual life insurance products offered by the insurance company, and the premium for the converted policy may be based on the individual’s age at the time of conversion.

Now, let’s explore why the other options are not correct:

A) Owner’s Rights clause:

The Owner’s Rights clause in an insurance policy defines the rights and responsibilities of the policy owner. It grants the policy owner various privileges, such as the right to change beneficiaries, access policy cash values, and make decisions regarding the policy.

However, the Owner’s Rights clause does not specifically relate to an individual’s ability to leave a group Term Life insurance policy and continue coverage without evidence of insurability. It deals more with the management and control of the policy rather than conversion options.

B) Incontestable Period:

The Incontestable Period is a provision found in many life insurance policies, including Term Life insurance. It states that after a certain period (typically one or two years) from the policy’s issuance or reinstatement, the insurance company cannot contest or challenge the policy’s validity based on misrepresentations or omissions made by the insured in the application.

While the Incontestable Period is an essential feature to protect policyholders from potential disputes, it is unrelated to the ability to convert group Term Life insurance into an individual policy without providing evidence of insurability. It focuses on the contestability of the policy, not the conversion process.

C) Insuring Agreement:

The Insuring Agreement is a fundamental part of any insurance policy, including Term Life insurance. It outlines the core promises and obligations of the insurance company, such as the coverage provided, the circumstances under which benefits are payable, and the terms and conditions of the policy.

While the Insuring Agreement is critical for understanding the scope of coverage, it does not pertain to the specific feature that enables an individual to leave a group Term Life policy and continue coverage without evidence of insurability.

This clause defines what the insurance policy covers and the conditions under which it pays benefits but does not address conversion options.

In summary, the correct answer is option D) Conversion privilege because it directly relates to the feature that allows an individual to leave a group Term Life insurance policy and continue coverage without providing evidence of insurability.

This privilege offers individuals flexibility and peace of mind when transitioning from group coverage to an individual policy. The other options, A) Owner’s Rights clause, B) Incontestable Period, and C) Insuring Agreement, while important aspects of an insurance policy, do not specifically address this conversion feature and its associated benefits.

• A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT: