Tennessee Insurance Practice Exam

What is a potential benefit of a convertible term policy?

1. Lower premiums than whole life

2. Ability to convert to permanent insurance without evidence of insurability

3. Guaranteed cash value from the start

4. Automatically covers additional family members

The correct answer is: Ability to convert to permanent insurance without evidence of insurability

The ability to convert to permanent insurance without evidence of insurability is a key benefit of a convertible term policy. This feature allows policyholders to transition from a term life insurance plan, which provides coverage for a specific period, to a permanent life insurance policy that offers lifelong coverage and may accumulate cash value. This conversion option is particularly valuable because, when converting, individuals do not have to undergo additional medical underwriting. Therefore, even if their health has declined since they first obtained the term policy, they can still secure permanent coverage. This can provide peace of mind and financial security, especially in situations where health issues might make it difficult or expensive to obtain new insurance coverage later on. Other options, such as lower premiums compared to whole life, may be true but do not specifically highlight the unique benefit of the convertible term feature. Similarly, mentioning guaranteed cash value is more relevant to permanent life insurance rather than term policies. Lastly, the ability to automatically cover additional family members is not a standard benefit of convertible term policies; such features are typically found in specialized insurance products or riders.