No Medical Group Life Insurance Conversions
Health Evidence Free Individual Life Coverage
Nov 6, 2009
Employees with group life insurance have a unique opportunity to apply for individual life coverage if they retire or otherwise lose their jobs. In addition, if an employer reduces the amount of group life coverage, affected employees can also apply to convert the amount of life insurance they lose to an individual insurance policy.
The conversion privilege applies to employees and their dependent spouses covered for group life insurance benefits.
Group Life Conversion Requirements
Under the group life conversion privilege, the insurance company must receive both written application and the first premium payment from the terminated or retiring employee within 31 days from the date their employment ends.
Most insurance companies have a standard form to request conversion of group life insurance. To obtain a copy of this form, employees should check with their human resources department. Employees can also learn the amount of required first premium, and contact details on where to send the completed request form and premium payment within the 31-day deadline period.
Life Conversion Privilege Benefits
The insurance company is legally obligated to offer individual life coverage to any eligible employee who elects the group life conversion privilege. This means that even a seriously ill patient must be issued replacement life insurance, without having to undergo a medical exam or filling out any form to describe their medical condition.
The process is quick and easy.
The life conversion privilege also applies to the employee’s spouse if covered for dependent life insurance. However, life conversion usually is not available for dependent children. The premium rate for the individual policy will be based on the insurance company’s rate for the sex, plan and age of the person on the effective date of the individual policy.
Even if an employee does not apply for the life conversion privilege, the insurance company will pay a death claim should the employee die during the 31-day conversion period. This is sometimes referred to as free coverage.
Life Conversion Privilege Restrictions
If the employee is covered under another group life contract within the 31-day period, the replacement amount of group life coverage is subtracted from the amount eligible for conversion to individual insurance. In no event can the replacement amount exceed the original amount of group life insurance.
Most insurance companies also impose an overall maximum amount of $200,000 or $250,000 for any life insurance conversion under the group policy. And while employees can choose from different types of individual life insurance, policies with a disability provisions like the premium waiver clause are not available under the conversion privilege.
Sample Plain Language Version of Booklet Wording
Below is sample wording that might appear in an employee group benefits booklet.
"An employee whose Life coverage ends or reduces may apply to convert the group Life coverage to an individual Life policy. Proof of good health will not be required.
If the employee’s spouse has coverage that ends, that spouse may apply to convert the group Life coverage to an individual Life policy without providing proof of good health. This privilege is not available for dependent children.
There are a number of rules and conditions in the group contract that apply to converting this coverage, including the maximum amount that can be converted. Employees are to contact their employer for details."
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