West Virginia State Life Insurance Practice Exam

What can an employee do with a group life contract after retiring at age 59 1/2?

1. Convert it to an individual permanent policy at an individual rate

2. Sell it to another employee

3. Leave it as is until they pass

4. Transfer it to a family member

The correct answer is: Convert it to an individual permanent policy at an individual rate

When an employee retires at age 59 1/2, they typically have the right to convert their group life insurance contract into an individual permanent policy at an individual rate. This option allows the retired employee to maintain life insurance coverage beyond the group plan's termination, ensuring that they still have a safety net for their beneficiaries. The group policy usually offers a conversion privilege, designed for individuals who may face difficulty obtaining new life insurance due to age or health conditions. Converting to an individual policy grants the retiree the flexibility of personalizing their coverage while securing it at an age when they are more likely to face higher premiums due to health factors. This option is especially advantageous, as it removes potential obstacles that might arise from standard underwriting processes required for new individual policies. The other choices do not align with standard practices governing group life insurance conversion rights. For instance, selling it to another employee would violate the terms of the contract, which restricts ownership transfer. Leaving the policy "as is" would typically result in the loss of coverage once the group insurance ceases. Transferring the policy to a family member is not permissible unless specifically stated in the policy provisions, which is generally not an allowed option in group plans.