Many life insurance policies include a conversion clause. A conversion clause provides a policy owner with the contractual right to update or to convert a policy. The primary benefit of a conversion clause is that the person whose life is insured does not have to undergo medical underwriting for an updated policy to issue. In Tennessee life insurance policy cases, a policy owner’s rights under a conversion clause may be important to understand.
Underwriting classes are determined based on the medical history, physical condition, habits, and smoking status of the life of the person insured by the policy. Sometimes though, an insurance company will change the names of its underwriting classes so that there is no underwriting class by the same name or description as the underwriting class which applied to the first policy. If that occurs, what type of underwriting class, and thus, premium rate, should apply when the policy is converted? The classification of the life of an insured can mean thousands, or tens of thousands, of premium dollars.
A couple of federal cases provide some guidance.