Life Insurance

What Happens to Group Life Insurance When You Leave a Job?

When employees leave their job, they have a window of time starting from day 31 until day 60 when they can either convert or port their policy. If they miss the window of time, the policy will terminate, and the former employee will lose access to the death benefit.

Life Insurance after losing ajob

Following what happens to life insurance when you leave a job can be a complicated road. However, your company may have a few options to keep coverage for those who retire or join a different company.

What Happens to Life Insurance When You Leave a Job? 

In most cases, the policyholder will lose access to the policy and the death benefit when they leave their job.

Life insurance is a policy that provides financial support to a policyholder’s family after they pass away. Employers offer life insurance policies as a part of their employees’ benefits package while working there. Employers generally provide a group term life insurance plan.

Group life insurance is a policy where people pay toward the death benefit. It’s more affordable because most group life insurance is term insurance. The employer also contributes part of the premium and the employee contributes the other part.

Should You Get Life Insurance Through Your Job? 

There are, of course, pros and cons to every situation. A pro is that the policyholder wouldn’t have to give any medical information to receive the coverage. Employees qualify for coverage regardless of pre-existing health conditions, age, and location without additional screening. Depending on the employer, some life insurance is fully paid for by the employer. If you’d like more insurance, you can purchase extra term insurance for a small premium.

Unfortunately, the policies aren’t typically customizable, and the death benefit is usually lower than it would be with a private policy. Also, switching from a group policy to an individual policy can be more expensive than the original group policy. 

Employer-Provided Life Insurance After Changing Jobs

In some cases, the policy is portable and can follow the policyholder to their next position. The policyholder might also have the option to switch from a group term life policy into an individual term life policy. Still, the premium may be higher than the original policy.

How Does Group Life Insurance Work?

A group life insurance policy is a term policy that applies to several people at a time. These policies renew after a few years. The price can also fluctuate during the term period depending on the company’s average age and the employees’ health. The price for the coverage will either be free or lower than an individual term policy because so many employees are involved.

Employer-Provided Life Insurance After Changing Jobs

Employees should check with their human resources department to see if the policy is transferable to their next job. If not, they can consider canceling the coverage, letting it lapse, or changing it from a group policy to an individual one. Employees must inform former employees of the terms of their life policies due to the Employee Retirement Income Security Act (ERISA) of 1974.

Your Employer Must Inform You of Your Coverage Termination

An employee’s coverage terminates when they leave their job. The Employee Retirement Income Security Act, otherwise known as ERISA, requires employers to inform former employees of when their policy will end. Employers also have to tell the former employee about the options for their coverage.

You Must Adhere to Strict Deadlines for Converting or Porting Life Insurance Coverage

Employees who keep the same life coverage in effect after retiring or changing employers have “ported” the policy. If the employee decides to change the policy from a group term policy to an individual term policy, they have converted the policy. The former employee must carry out these actions within the timeframe specified on the Notice to Convert. 

The employer sends out this document after the employee leaves. It notifies the former employee that they have between 31-60 days to either convert or port the policy before it lapses and they lose coverage.

Denied Claims: What Happens if You Fail to Convert or Port the Policy?

The employee has to make the changes within the deadline, or they risk losing the policy and access to the death benefit. However, the former employee still has options if a claim is denied due to conversion or portability issues. The ERISA has rules to protect employees from predatory life insurance practices. 

If the life insurance company denies a former employee’s claim, they can file an appeal with ERISA, and the organization could find the former employees in favor. The laws can be complex, but with the help of an ERISA lawyer, the former employee could still receive the death benefit for the policy.