Which statement regarding the exercise of a conversion option on a Convertible Term Assurance (CTA) is CORRECT?

The conversion option on a Convertible Term Assurance (CTA) can indeed be exercised even if the life assured is in bad health. This is a critical feature of convertible term insurance products, as it provides the policyholder with flexibility and security. The conversion option allows the policyholder to change their term policy into a permanent policy without needing to provide evidence of insurability at the time of conversion. This means that if the individual experiences a deterioration in health before exercising the option, they will still be able to convert their policy without being penalized or denied coverage based on their current health status.

In contrast, the other options present limitations or conditions that are not characteristic of how conversion options typically function. For instance, the premium on the new policy is generally determined by the insured's current age and the new coverage amount, which may be higher than the original policy, especially as time goes on. Additionally, the conversion option is usually available for a specific period during the term of the policy, often extending beyond just three months after the termination of the original policy. Finally, while some policies may allow for partial conversions, standard practice often allows for the entire coverage amount to be converted, making the option for partial transfer less typical.