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product, is an individual universal life insurance policy known
as the C-group conversion universalife (UL) policy. The C-group
conversion UL policy is referenced in the C-group term contract
and the C-group conversion UL contract as a “special conversion
policy”.
The C-group term policy provides covered employees with a
life insurance (death) benefit while they work and a cash value
that they may access by converting the term policy to the C-group
conversion UL policy. Commonwealth and Inter-American assumed
that 95 percent of the C-group term policyholders would
ultimately convert their policies to C-group conversion UL
policies, and they priced both policies together as two
components of a single policy. Premiums on the C-group term
policy are paid annually, and these premiums are approximately
four to six times greater than premiums for a conventional life
insurance group term policy (e.g., the MG-5 policy); as discussed
infra, premiums on the C-group term policy fund both
preconversion death benefits and postconversion credits
(conversion credits) anticipated to be applied to the C-group
conversion UL policy. If a premium is not paid timely on the C-
group term policy, the policy terminates; i.e., lapses. Upon its
lapsing, an individual policyholder has a guaranteed right (i.e.,
without evidence of insurability) to convert his or her policy to
an individual policy; e.g., the C-group conversion UL policy. A
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