What does it mean when a life insurance policy has a conversion privilege?

When a life insurance policy includes a conversion privilege, it means that the policyholder has the right to transform or convert their existing policy into another type of coverage, typically without the need for additional medical underwriting. This feature is especially beneficial for policyholders who may wish to switch from a term life policy to a whole life or permanent policy as their needs change over time.

The conversion privilege offers flexibility and ensures that individuals can continue their coverage even if their health status changes, potentially making it more difficult to obtain new insurance later. This option preserves the policyholder's insurability and allows for a smoother transition into a more suitable policy as their life circumstances evolve.

Other options related to transferring the policy to another person, restoring it after lapsing, or mandating changes in premium payments do not accurately reflect the nature of a conversion privilege in life insurance policies.