When a group plan containing a conversion option is elected, the new policy...

In the context of group insurance plans, when a conversion option is exercised, the new policy is considered a guaranteed issue. This means that individuals who are transitioning from the group plan to an individual policy cannot be denied coverage based on their health status or medical history. The conversion option is designed to provide continuity of coverage for those who may otherwise have difficulty obtaining individual insurance, particularly if they have health issues that would make it challenging to qualify for a new policy in the standard market.

A standard practice in many group plans is to allow members to convert their group coverage to an individual policy without the need for medical underwriting, which reinforces the principle of guaranteed issue. This provision is particularly important for individuals who may face increased health risks once they lose their group coverage, as it ensures they can secure insurance without the barriers typically present in the individual market.

The other options—requiring evidence of insurability, having a lower premium rate, and requiring a medical exam—do not align with the nature of a conversion option, which specifically aims to provide individuals the opportunity for continuous coverage without added conditions that would normally apply in individual insurance applications.