Question

25 meera, who is covered under her companys group insurance plan, plans to resign and take a break to focus on her health as she was recently diagnosed with diabetes. meera wants to ensure the insurance coverage continues. she plans to cancel the group contract and apply for an individual policy as she feels her current premiums are too high. which of the following should meera be aware of before she cancels her group contract?
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a. she will have to provide evidence of insurability for a new individual contract, and her premiums are likely to be high due to the recent diagnoses.
b. she need not provide evidence of insurability for a new individual contract, but her premiums are likely to be higher due to adverse selection.
c. she need not provide evidence of insurability for a new individual contract, and her premiums will be the same as that of the group contract.
d. she will have to provide evidence of insurability for a new individual contract, but her premiums will be lower compared to the group contract.
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Explanation:

In group insurance, when switching to an individual policy, especially with a recent health diagnosis (diabetes here), insurers typically require evidence of insurability for individual contracts. Also, pre - existing conditions or recent diagnoses increase risk, so premiums for individual policies are likely higher than group (group policies have risk spread over many, so lower avg premiums). Option a states she needs to provide evidence of insurability and premiums will be high due to recent diagnosis, which matches insurance principles. Option b is wrong as evidence of insurability is needed. Option c is wrong as premiums won't be same (individual is riskier for insurer). Option d is wrong as premiums won't be lower (individual has higher risk than group).

Answer:

a. She will have to provide evidence of insurability for a new individual contract, and her premiums are likely to be high due to the recent diagnoses.