South Carolina Life Insurance Practice Exam

What is a major advantage of converting from group life insurance to individual coverage?

1. Lower premiums

2. Evidence of insurability is required

3. Increased loan values

4. Access to higher death benefits

The correct answer is: Increased loan values

Converting from group life insurance to individual coverage offers a significant advantage in terms of increased loan values. Individual policies often provide more favorable terms concerning the accumulation of cash value that can be borrowed against. In group life insurance, the coverage is typically offered without the accumulation of cash value, meaning policyholders can’t take loans against it. Conversely, individual whole life or universal life policies build cash value over time. Once you convert to an individual policy, this cash value can become available for loans, which can serve as financial support during emergencies or other significant needs. This transition allows individuals greater financial flexibility and the opportunity to leverage the financial benefits of their policy, which is particularly important for those who have specific financial planning goals in mind. Access to higher death benefits is also a consideration, as an individual policy may allow for customized coverage amounts based on personal needs. However, the emphasis on loan values is crucial as it highlights a substantial financial advantage that often influences an individual's decision to convert.