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

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

• A. To reduce premium costs after a year
• B. To convert term life to permanent life without evidence of insurability
• C. To increase the death benefit amount
• D. To reinstate a lapsed policy automatically

Answer: (B)

The purpose of a conversion privilege in a life insurance policy is specifically to allow policyholders to convert a term life insurance policy into a permanent life insurance policy without having to provide evidence of insurability. This feature is valuable because it enables individuals to secure insurance coverage that lasts for their entire lifetime once their term policy ends, regardless of their current health status, which could make it difficult or impossible to secure a new life insurance policy. This option is especially important as it provides flexibility and security for policyholders who may develop health issues during the term period. The ability to convert to a permanent policy can be crucial for maintaining adequate life insurance coverage as life circumstances and needs change over time.

The purpose of a conversion privilege in a life insurance policy is specifically to allow policyholders to convert a term life insurance policy into a permanent life insurance policy without having to provide evidence of insurability. This feature is valuable because it enables individuals to secure insurance coverage that lasts for their entire lifetime once their term policy ends, regardless of their current health status, which could make it difficult or impossible to secure a new life insurance policy.

This option is especially important as it provides flexibility and security for policyholders who may develop health issues during the term period. The ability to convert to a permanent policy can be crucial for maintaining adequate life insurance coverage as life circumstances and needs change over time.