Life Insurance After Termination: Can Group Coverage Continue?

Group life insurance is a common employee benefit that provides a death benefit to the insured's beneficiaries if they pass away while working for the organization. However, when an employee leaves the organization, their group life insurance coverage typically terminates. This includes terminations due to firing, quitting, changing jobs, or retirement. So, what are the options for employees who want to retain their life insurance coverage after leaving their job?

Group life insurance policies are usually terminated when you leave a job

Group life insurance is a common employee benefit that provides a death benefit to the insured's beneficiaries if they die while part of the organization. It is often a great perk of employment, as it is affordable, easy to qualify for, and gives employees and their families a sense of security.

However, one of the main disadvantages of group life insurance is that it is usually tied to your job. This means that if you leave the company, whether voluntarily or not, your life insurance policy will likely terminate. This is because group life insurance is a single contract for life insurance coverage that extends to a group of people, and once an individual is no longer part of that group, their coverage often ends.

That being said, there are a few options for continuing your group life insurance coverage after leaving a job. Firstly, some employer-sponsored life insurance plans are portable, meaning you can take your policy with you when you leave the company, although you will likely face higher premiums. Secondly, some plans are convertible, allowing you to switch your group coverage to an individual plan, such as whole or universal life insurance, but again, premiums will increase.

It is important to note that these options are not always available, and even if they are, there are strict deadlines for converting or porting your coverage. Therefore, if you are considering leaving your job, it is crucial to understand your options and plan ahead to ensure your coverage continues.

Some policies may be portable, allowing you to pay for the same coverage via a renewable term life policy

While group life insurance is a great benefit to have, it is usually tied to your job. This means that if you leave your job, your life insurance policy will likely stay with your employer. However, some policies may be portable, allowing you to pay for the same coverage via a renewable term life policy.

If your employer's group life insurance is portable, you can choose to "port" your coverage, paying your premium directly to the insurance company to maintain your coverage. This is often done when someone leaves their job or is fired, and will otherwise have a gap in coverage. It's worth noting that employer life insurance portability is uncommon, and most employer-provided coverage ends when you leave your job or soon after.

If you decide to port your group policy, you will be responsible for paying the premium yourself. As time goes on, you can choose to renew or end your ported coverage, typically on a monthly or annual basis. Before porting your employer's group life insurance, it's a good idea to compare the potential cost to the cost of a standard term life insurance policy. This way, you can see if it makes more sense to simply purchase your own term life policy.

Porting your policy can also be done as a form of supplemental life insurance, helping to prevent a gap in coverage while you explore your other options. It's important to act quickly, as porting your life insurance after termination usually needs to take place within 30 to 60 days of leaving your job.

You can convert your group coverage into an individual life insurance policy

If you want to keep your group life insurance policy after leaving your job, one option is to convert your group coverage into an individual life insurance policy. This is possible if your former employer's group policy allows for conversion. However, you will be responsible for paying the entire premium out of pocket.

Converting your group coverage into an individual policy will result in a higher premium than what you paid for group coverage. This is because permanent coverage costs more than term coverage. Before converting, it is recommended to compare the potential cost of conversion with rates for a standard whole life policy to ensure you are getting the best deal.

It is important to act quickly if you are considering converting your group coverage to an individual policy, as there is usually a short window of time—often 31 to 60 days from the date your group coverage ends—in which you can make the conversion. Your former employer is required by law to notify you of your option to convert and the deadline for doing so.

Converting your group coverage into an individual policy is a good option if you are uninsurable due to health issues, as a medical exam is typically not required for conversion. It also ensures that your loved ones remain protected by life insurance coverage, even after you leave your job.

You must act fast to understand your options and ensure your coverage continues

If you want to keep your group life insurance coverage after termination, you must act fast. Group life insurance is usually tied to your job, so when you leave a company, your coverage will likely end. However, you may have some options to continue your coverage, but you'll need to understand these options quickly and take action to ensure there's no gap in your insurance.

Firstly, check the terms of your employer's benefits plan. Group life insurance policies are often tied to employment, so your coverage will typically terminate when you leave a company. But some policies may be "portable", which means you can pay for the same coverage via a renewable term life policy. You'll need to check the details of your employer's plan to see if this is an option. If your former employer decides to stop offering coverage, they are required to notify you under federal law.

If your group life insurance is portable, you'll need to act fast. Porting your life insurance after termination usually needs to take place within 30 to 60 days of leaving your job. You'll also need to compare the potential cost of porting your policy to the cost of a standard term life insurance policy. It may be more cost-effective to purchase a new policy, depending on the quotes and coverage you qualify for.

Another option is to convert your group coverage into a permanent individual life insurance policy. This means your policy is converted from a group life policy to an individual one, which comes with higher premiums. You'll be responsible for paying these premiums, and they will be higher than what you paid under the group plan. As with porting, you'll need to act fast if you want to convert your policy—you'll usually have 31 to 60 days from the date your group coverage ends to make the conversion.

If you don't have the option to port or convert your group life insurance, you'll need to apply for new coverage. This could be through your new employer, if they offer group life insurance, or independently from a life insurance company or agent. Keep in mind that your new coverage will be based on your current age and health status, and certain health conditions can make it difficult or even impossible to qualify for coverage. That's why it's often a good idea to carry additional life insurance independent of what you have through your employer.

You will likely need to pay higher premiums to keep your coverage after leaving a job

If you want to keep your group life insurance policy after leaving your job, you may be able to do so by paying higher premiums. This is because, when you leave your job, you are no longer part of your company's group plan, and your former employer is not required to continue paying for your coverage. Therefore, if you want to maintain your coverage, you will likely need to pay the full premium out of pocket.

The option to keep your coverage by paying higher premiums is known as "porting" your policy. Porting allows you to pay your premium directly to the insurance company to maintain your coverage after leaving your job. However, it's important to note that porting your policy may result in significantly higher costs, and it is not a common option offered by employers. Most employer-provided coverage simply ends when you leave your job.

If porting is not available, another option may be to convert your group coverage into an individual life insurance policy. This means that your policy will be changed from a group life policy to an individual one, which also comes with higher premiums. While the increased cost may be undesirable, those who are uninsurable due to health issues may benefit from this option, as a medical exam is typically not required for conversion.

It's important to act quickly if you want to keep your group life insurance coverage after leaving your job. In most cases, you will have a short window of time, typically 30 to 60 days, to decide whether to port or convert your policy. Your employer is required to notify you of any changes to your coverage and your options for continuing it. You can find this information in the Notice to Convert sent by your employer or in the plan documents provided by your employer or insurer.

Frequently asked questions