South Carolina Life Insurance Practice Exam

Which statement about an employee’s transition from group life insurance is INCORRECT if she terminates her group coverage?

1. The employee loses all insurance immediately

2. She can convert to an individual policy

3. Her premiums may increase significantly

4. Conversion must occur within a specified period

The correct answer is: The employee loses all insurance immediately

The assertion that an employee loses all insurance immediately upon terminating her group life insurance coverage is incorrect. Typically, when an employee leaves a job or terminates their group coverage, they do not lose all benefits immediately. Instead, they are often given a grace period during which they may have continued coverage or the option to convert to an individual policy without having to undergo medical underwriting. In many cases, group life insurance policies provide the employee with the right to convert to an individual policy, and this conversion allows the employee to maintain some level of life insurance coverage after leaving the group plan. This option ensures that the employee is not left without coverage right away, which is an important aspect of employee benefits. The other statements are accurate: the employee can indeed convert to an individual policy, her premiums may increase significantly due to the absence of group pricing, and there is typically a specified timeframe in which the conversion must take place. Each of these elements highlights the thoughtful considerations incorporated into life insurance policies, ensuring that employees have options and protections when transitioning from group to individual coverage.