Life Insurance: Fired, Now What?

Life insurance is a valuable benefit that can provide peace of mind and financial security for you and your loved ones. However, it's important to understand what happens to your life insurance policy if you experience a job loss, whether through termination or otherwise. While it may be a concern, there are a few options to consider when it comes to maintaining your coverage. Firstly, it's crucial to review the terms of your employer-sponsored group life insurance plan, as some policies may offer portability, allowing you to retain your coverage by paying premiums directly to the insurance company. Additionally, you may have the option to convert your group policy into an individual life insurance policy, although this will result in higher premiums that you'll need to pay yourself. These options usually need to be exercised within 30 to 60 days of leaving your job. If your employer-provided life insurance doesn't offer portability or conversion, your coverage will likely end when you leave your job, and you'll need to seek alternative coverage. This could include finding group coverage through a new employer or purchasing an individual life insurance policy. It's always a good idea to carry additional life insurance independent of your employer-provided coverage to ensure continuous protection.

Employer-provided life insurance typically ends when you leave your job

Life insurance is one of those benefits that can feel like a bonus—it's often free or very inexpensive, and gives you and your family a sense of security. However, employer-provided life insurance typically ends when you leave your job. This means that the safety net you've been counting on disappears, leaving you without coverage unless you take action.

When you have life insurance through your employer, it is usually offered through a company's group life plan. While plans differ, in many cases, these benefits are offered to all employees, with the employer paying part or all of the policy's premium. Therefore, if you leave your job, you are no longer part of the company's group plan, and your former employer is not required to pay for your coverage.

If your employer's group life insurance is portable, you can opt to "port" your coverage, paying your premium directly to the insurance company to keep it active. However, employer life insurance portability is not common, and most employer-provided coverage simply ends when you leave your job or shortly after.

If you want to keep your policy and are unable to port your coverage, you may be able to convert your group policy to an individual policy if your plan allows. However, because you'll no longer be on your company's plan, you'll be responsible for paying the entire premium out of pocket, and these premiums can be higher.

Generally, if you have no other options, your life insurance coverage will end when you leave your job. That means you'll need to apply for new coverage, either at your new job or independently from a life company or agent, based on your current age and health status. Certain health conditions can make it difficult to find an affordable policy or even make it impossible to qualify for coverage. For these reasons, it's often a good idea to carry additional life insurance independent of what you have through your employer. That way, the policy you have is yours no matter where you choose to work.

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

If you're fired or leave your job, your employer-provided life insurance will typically end, but some policies may be "portable", allowing you to pay for the same coverage via a renewable term life policy. This means that you can opt to ""port" your coverage, paying your premium directly to the insurance company to maintain your coverage. This is often used when someone leaves their job or is fired, preventing a gap in coverage. However, employer life insurance portability is uncommon, and most employer-provided coverage simply ends when you leave your job or shortly after.

If you choose to port your group policy, you'll pay the premium yourself, and as time passes, you can decide to renew or end your ported coverage, typically on a monthly or annual basis. Before porting your employer's group life insurance, it's recommended to compare the potential cost to the cost of a standard term life insurance policy to determine the most cost-effective option. You may decide to port your policy simply as a form of supplemental life insurance while you explore your options.

Porting your life insurance after termination usually needs to take place within 30–60 days of leaving your job. If you don't port your coverage within this timeframe, your coverage will likely end.

You may be able to convert your group policy to an individual policy

If you have a group life insurance policy, it's usually tied to your job. This means that if you leave the company, whether voluntarily or not, your life insurance policy will likely stay behind. However, some employer-sponsored life insurance plans are convertible, which means you can switch your group coverage to an individual plan, such as a whole or universal life insurance policy.

If you decide to convert your group life insurance policy to an individual policy, there are a few things to keep in mind. First, you will be responsible for paying the entire premium out of pocket, as your employer will no longer be covering any part of the cost. Second, converting your policy will likely result in higher premiums. Finally, you may have a short window of time, typically 30 to 60 days, to convert your policy after leaving your job.

It's important to note that not all group life plans offer the option to convert coverage. To find out if this is an option for you, check with your human resources department or benefits specialist to discuss your specific plan's contract.

By converting your group policy to an individual policy, you can ensure that you and your loved ones remain protected even after you leave your job. This can provide peace of mind and financial security during times of transition.

You have a short window of time to convert your insurance coverage

If you're fired or leave your job, your employer-provided life insurance will likely end. However, some policies may be "portable", allowing you to pay for the same coverage through a renewable term life policy. Alternatively, some policies may let you convert your coverage into a permanent individual life insurance policy.

If you decide to convert to an individual policy, you will enter into a new contract with the insurance company and be responsible for paying the premiums directly. It's important to note that this decision must be made within a short window of time. For example, in Maryland, you must be allowed at least 31 days after your group coverage ends to make this decision. In other cases, porting your life insurance after termination must take place within 30–60 days of leaving your job.

Converting to an individual policy will result in higher premiums, as permanent coverage costs more than term coverage. Before making a decision, it is recommended to compare the potential costs with rates for a standard whole life policy, as purchasing a new policy may be more advantageous depending on the quotes and coverage you qualify for.

You can buy a marketplace plan to bridge the gap until new job-based insurance starts

Losing your job is stressful, and you may be concerned about the gap in your insurance coverage until you find a new job. If you lose your job-based health insurance, you can enrol in a Marketplace plan to bridge the gap. This option is available to you even if you quit or get fired.

The Health Insurance Marketplace® allows you to qualify for a Special Enrollment Period to get coverage for the rest of the year. You need to apply within 60 days of losing your job-based coverage, and your new coverage can start the first day of the month after your previous coverage ends.

When you apply for coverage in the Marketplace, you will find out if you qualify for savings on your monthly premiums or a tax credit to lower your monthly insurance payment. You may even be eligible for free or low-cost coverage from Medicaid or the Children's Health Insurance Program (CHIP).

You can create an account and preview plans and estimated prices based on your income. It is important to note that you may need to provide proof that you lost your previous health insurance.

This option allows you to have continuous coverage while you search for a new job, ensuring that you and your family remain protected during this transition period.

Frequently asked questions