Rhode Island Life Insurance Practice Exam

An employee with $25,000 group term life coverage that was recently fired can convert this coverage to what type of policy?

1. $25,000 individual whole life policy

2. $25,000 term life policy

3. $50,000 individual whole life policy

4. $25,000 universal life policy

The correct answer is: $25,000 individual whole life policy

When an employee has group term life insurance coverage and leaves their job, they typically have the option to convert their group coverage into an individual policy without having to submit evidence of insurability. In this case, the employee has $25,000 of group term life insurance coverage, and upon conversion, they can obtain a policy that matches the amount of their previous coverage. Choosing an individual whole life policy as the conversion option allows the employee to benefit from the lifelong coverage, guaranteed cash value accumulation, and fixed premium structure that whole life insurance provides. This type of policy ensures that the insured will have coverage for their entire life, as long as premiums are paid, and it affords a degree of financial security and a savings component. Conversion generally does not allow for an increase in coverage amount or a lower-quality policy option. Thus, the choice of a whole life policy for the exact coverage amount previously held — $25,000 — aligns with the purpose of conversion rights typically provided in group term insurance contracts.