Question

In order to convert a term policy to a permanent policy as of the original issue age, all of the following must occur, except:

A - Interest will be charged and have to be paid at the time of conversion
B - The cash values will have to be paid out first before the conversion can be effected
C - The request for conversion must be made on a timely basis
D - Back premiums will have to be paid at the time of conversion

Answer 1

The conversion of a term policy to a permanent policy at the original issue age does not require cash values to be paid out, as term policies typically don't accumulate cash values. Other requirements may include the payment of back premiums and potentially charging interest on these premiums when overdue.

Step-by-step explanation:

The question is about the requirements for converting a term policy to a permanent life insurance policy at the original issue age. Three of the options listed involve things that must occur for such a conversion, except one. The correct answer is B - The cash values will have to be paid out first before the conversion can be effected. Typically, term life insurance policies do not have cash values associated with them, which is a feature of permanent policies. The conversion process usually allows the policyholder to switch to permanent insurance without cashing out, since there is nothing to cash out from a term policy. Meanwhile, if a conversion is requested, any back premiums owed may have to be paid, and an interest may be charged on these overdue premiums.