Conversion Privilege

When an employee quits, terminates or retires, they lose all their benefits.  But did you know that some benefits allow for conversion privileges?  This clause under a group benefit plan is often overlooked.  Most employees are not aware that they have a choice when group coverage ends, so it is very important that a Plan Administrator informs or reminds employees of the conversion privilege when they leave their job. 


Basically, the conversion privilege allows an employee to convert a certain group benefit into an individual plan without providing medical evidence of insurability.  That means guaranteed coverage regardless of one’s health condition.  No need to fill out medical forms or pass any health tests to be approved for coverage.  To exercise the conversion option, the employee must complete and return the relevant forms to the insurance provider within a specific time frame – normally within 31 days of the coverage terminating for Life products and within 60 days for Extended Health and Dental.


As group policies are cheaper than individual policies, premiums are a bit higher when converting to individual plans.  The “no medical evidence required” feature also adds to the cost.  For some people, it may be too expensive or unnecessary to convert coverage into a personal plan.  On the other hand, it may still be the best option for people who need insurance but are concerned that they might not get it because of age, smoking status or medical issues.  It may also come in handy for those who might not have benefits in their next workplace.


The most common example of benefit that can be converted into an individual policy is Group Life Insurance.  In most group plans, employees under age 65 may elect to convert all or part of the group life coverage without the need to provide medical evidence of insurability. 


For instance, if an employee had a Group Life benefit of $50,000, and the last day of work is November 30th, the employee could convert $50,000 or less into an individual policy and not be required to provide evidence of good health if the carrier receives the application by December 31st.


Depending on the group plan in place, other benefits such as Dependent Life, Accidental Death and Dismemberment, Group Critical Illness, Extended Health and Dental may also be converted into individual plans.  Keep in mind that group plans vary and not all benefits include conversion privilege clause.  It is recommended to refer to the benefit booklet for more details.