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MPF intermediaries
MPFMPF Intermediaries ExaminationMei took out a 20-year convertible term policy at age 30. At 38 she uses the conversion privilege to change to a whole life plan without a medical. The new premium is normally based on:
Answer: the standard rate for her attained age of 38. On conversion, the permanent plan's premium is calculated at the standard rate for that plan at the life insured's attained age.Why not the others:• the rate for her entry age of 30: The conversion premium uses the attained age, not the age when the term policy began.• a rated-up premium reflecting her current health: No evidence of insurability is needed on conversion, so her current health is not rated.• the term premium she already pays, plus a conversion fee: The permanent plan has its own standard premium; it is not the term premium plus a fee.Watch out: Thinking conversion keeps the original entry age, or that the insurer re-underwrites her health.Rule: Convertible term: the policyowner may switch to permanent cover with no health evidence, paying the standard rate for the attained age.Source: IA Long Term Insurance (Paper III) Study Notes, 2022 Edition (8th ed., June 2022; for exams from 24 Oct 2022), 2.1.1b(b), p. 2/4
Thinking conversion keeps the original entry age, or that the insurer re-underwrites her health.
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