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Definition: Conversion Privilege
Conversion Privilege is a type of insurance policy in which the insurer is required to renew his insurance policy regardless of his or her health condition. The condition for this type of insurance policy is to pay the premiums on time. In this the premiums as well as the coverage is guaranteed for a particular number of years. The insured can only change the premium if it is changed for the whole class of policy holders.
This insurance policy allows the insured to switch to a different policy without going through a physical examination. This option is generally provided by term life insurance. The insured has the option of converting his term life insurance into a permanent policy. So even if the person has been diagnosed with a serious health condition, he or she can change the term insurance into a permanent policy without going through any physical examination.
Also, this clause of insurance policy is used by the insured when he or she has to go for self employment or change of job. With this provision the insured can convert his group life insurance into individual life insurance with minimal hassle. The insured has to notify the life insurance company 31 days prior to leaving a job so that the person can continue with the same policy without any new approval process or medical examination. If the person fails to notify within 31 days then he or she has to go through the entire approval process and the medical examination. With this option the life insurance company extends the coverage to the insured based on the fact that he or she was already a part of the group life insurance. This option protects the insured from being denied the insurance in case of change of health condition or workplace.