Massachusetts Health & Accident Insurance Practice Exam

What is the purpose of the conversion privilege in group insurance?

1. To avoid tax liabilities on benefits

2. To convert a group policy to an individual policy

3. To renew an expired group insurance policy

4. To apply for additional coverage

The correct answer is: To convert a group policy to an individual policy

The conversion privilege in group insurance allows an individual covered under a group policy to convert their group coverage into an individual policy when they are no longer eligible for the group plan. This typically occurs due to events like leaving a job, reaching a certain age, or other changes in eligibility. The primary purpose of this conversion option is to ensure that individuals can maintain their health insurance coverage, even after their group policy ends, without having to provide evidence of insurability. This provision is particularly important because it helps prevent gaps in health insurance that could occur due to changes in employment or life circumstances. This feature is vital for policyholders who may be at risk of losing their coverage since they might otherwise face challenges obtaining individual health insurance due to pre-existing conditions or underwriting requirements. By facilitating this transition to an individual policy, the conversion privilege acts as a safety net, promoting continuity of coverage for individuals transitioning out of group settings. Options related to tax liabilities, renewing expired policies, or applying for additional coverage do not align with the main purpose of the conversion privilege, which is specifically focused on the transition of group policies to individual policies.