Can I convert an individual life insurance policy after retiring without having a medical exam?
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Asked March 18, 2013
Group policies, such as those you purchase or are awarded as a benefit of your employment, can be converted to individual policies. When you quit, retire, or get fired, you will have the option of converting your group policy. Whether or not you will have to pass a medical examination first will be determined by other factors, such as the state you live in, the company you are insured by, and your state of health at the time of the conversion.
Some group policies are written to allow conversion without a medical exam. Typically, you will have to pay higher premiums than if you had a policy that included a medical exam. This is to balance the risks for the insurance company, increasing the risks automatically rather than undergoing a medical exam to determine your exact condition of health.
Insurance is regulated on a state by state basis. Some states may require insurance companies to allow conversion from group to life insurance without a medical exam, while others will not. The idea is that your health did not change just because you retired, and you should not be penalized for the conversion or required to undergo an examination to determine whether the policy, which was already in effect, was written to account for your personal health and history.
Keep in mind that most group policies are limited in value. This limitation is due to the fact that group policies do not require medical exams, so the insurance company has to take special steps to be sure they have correctly estimated the risk of the group as a whole. What happens is that group polices tend to have higher rates, or specially developed low rates based on the group as a whole. When you convert to an individual policy, you will either see an automatic rate increase, or experience a decrease in the coverage value.
Insurance companies operate on a for-profit basis, and the policies they write are carefully calculated to give the best group coverage. When you convert the policy to an individual policy, the group statistics are no longer appropriate. If you want to convert the policy but avoid a medical exam, you may be better off to convert to a final expense policy than to convert to a whole life policy, simply because final expense policies already have the risks of not giving a medical exam calculated into them.
Answered March 18, 2013 by Anonymous