Can You Keep Your Life Insurance After Leaving Your Job?

New employees should read their group plans carefully for portability options.

New employees should read their group plans carefully for portability options.

There are times when a generous benefits package might be the reason you choose one employer over another. Group plans typically include life, health and disability coverage among their features, often at attractively low or employer-subsidized prices. Unfortunately, they can become a problem if you stay in a job you're unhappy with just to keep those benefits. Savvy job-hunters evaluate a company's program for portability, which is the option of turning that group coverage into private life insurance when you leave.

Portability

With traditional group plans, leaving the group inevitably meant leaving your coverage behind. That's bad for the employee, who might not be able to buy private coverage later in life. It's also bad for the employer, whose group plan might lose its luster relative to a competitor's offering. Finally, the insurer loses a client and the associated premiums. For those reasons, many group plans now offer the option of applying for continued coverage after leaving your current employment. That's called portability. It's important to read your plan closely, and ensure you understand its portability options.

The Amount

Most group plans begin with a specified amount of life insurance, either a set dollar amount such as $50,000 or $100,000 or a multiple of your yearly pay. You'll have the option of signing up for additional coverage, raising the death benefit either to the amount you need or the plan's upper limit. Most plans allow the insured person to take the basic dollar amount of coverage without having to prove insurability. Others allow the full amount of life coverage to be converted into private life insurance, though death benefits over a certain value might require a medical questionnaire.

Retirement

Some plans, especially those offered by governments, offer employees the opportunity to continue as part of the group if you leave the company to retire. This typically requires a minimum length of service before retiring. For example, employees of the state of Maine must have been members of the group plan for at least 10 years before retirement if they wish to remain active in the plan. For those who are eligible, premiums and coverage continue on their existing basis. Coverage continues as long as the premiums are paid.

Pros and Cons

Group insurance rates are often, but not invariably, advantageous. If you're younger than most of the other employees in the group, and if your health is good, you might find it cheaper to simply purchase your own life insurance policy. On the other hand, if insurance companies consider you a substandard risk, you might find better rates by converting your group coverage. Some plans allow their health and disability components to be converted to private coverage as well, provided you commit to taking the life coverage. In those cases, spouse and dependent coverage can often also be converted.

 

About the Author

Fred Decker is a trained chef and certified food-safety trainer. Decker wrote for the Saint John, New Brunswick Telegraph-Journal, and has been published in Canada's Hospitality and Foodservice magazine. He's held positions selling computers, insurance and mutual funds, and was educated at Memorial University of Newfoundland and the Northern Alberta Institute of Technology.

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