What is a conversion option in insurance policies?

A conversion option in insurance policies is designed to provide policyholders with flexibility in their coverage. Specifically, it allows an individual who holds a term insurance policy to convert that policy into a permanent insurance policy without the need to provide evidence of insurability. This means that the policyholder can change their insurance type, typically at the end of a term period, without undergoing a new medical examination or answering health questions that could affect their ability to obtain coverage.

This feature is particularly beneficial for individuals who may have developed health issues during the term of their policy, as it ensures they can still secure coverage without being denied due to their health status. It provides peace of mind and serves as a valuable option for policyholders looking to maintain life insurance coverage even as their needs or health conditions change over time.

The other options do not accurately represent the conversion option. The clause that restricts the insurer's liability for losses focuses on liability limitations rather than providing coverage flexibility. A feature allowing for premium increases at any time does not relate directly to converting coverage types. Lastly, the process for determining a policy's market value does not pertain to the conversion option but rather to the valuation of an existing policy.