Group life insurance is typically a subsidized life insurance policy offered through your employer. It can be a great deal, but when you leave your job, you’ll usually be forced to leave that life insurance policy behind.
However, there are certain ways to work around losing your life insurance policy. In this article, we outline whether you should get insurance through your employer and what happens to your life insurance when you leave your job.
What happens to life insurance when you leave a job?
In short, you lose your group life insurance when you leave your job. The long answer is more complicated, though. When these types of policies are offered as employment benefits, the policy itself is held by the employer, and the designated group of people who can be insured under the policy are the employees. This arrangement means that the only people who are eligible for that group plan are those currently employed by the entity that took out the policy. As a result, employees who leave that employer are no longer eligible for such a group plan.
However, there are some workarounds. Changing jobs is an increasingly common part of the American economy, and insurance companies have made some efforts to adapt.
What should you do with your life insurance when you change jobs?
When you change jobs, you can ask HR whether you can take your policy with you. If not, you can cancel your policy or let it lapse. Here’s what you need to know.
- You can cancel the policy or simply let it lapse: Group life insurance usually terminates about a month after you leave your job, so in effect, it’s self-canceling. Ideally, to avoid a lapse in insurance between jobs, it is generally best to plan for the transition from an old job to a new one by arranging for employee life insurance coverage to take effect as the previous one is canceled.
- You can inquire about whether the policy is portable: In most cases, employer-offered group life insurance is not portable—meaning that coverage will not go with you when you change jobs. However, if you are able to port your group policy to an individual term life policy, rates will likely be higher than your original premium.
- You can convert your group policy into an individual one: You might also be able to convert your group life insurance coverage to an individual whole life policy if you leave your job. But this option will also come with a higher rate because conversion premiums tend to be higher than premiums for group policies.
Should you get life insurance through your job?
Getting life insurance through work has some advantages and disadvantages. Here are a few pros and cons you should factor into your decision.
|It’s typically subsidized or free through your employer.||The amount of coverage could be much less than what you may actually need—leaving you underinsured.|
|You don’t have to supply medical information to qualify.||Group insurance is usually one-size-fits all with a low death benefit, so it’s difficult to get benefits and features that best fit you and your family’s needs.|
|On top of that base policy, you also may be able to buy additional life insurance at more affordable group rates through your employer plan.||If you leave your job, there are other downsides to continuing a life insurance policy with the former employer’s plan. For instance, there is a cost associated with continuing the group policy, and you have fewer coverage options.|
|If you leave your job, you might have the option to convert your group policy to an individual life insurance policy—which can keep your coverage in force. This choice could be an advantage in certain situations, say, if you’re a senior or have poor health, and might have concerns about qualifying for an individual policy.|
Frequently asked questions
What is the best life insurance company?
The best life insurance company will vary for everyone. To find the best choice for you, it can be helpful to talk with an insurance agent and discuss your coverage needs. Once you decide on a policy, you may want to get online quotes from multiple life insurance providers.
What are other options besides group life insurance?
There are many life insurance options available to you and it may help to discuss them with a licensed insurance agent. An individual policy may offer more affordable rates and a wider range of policy options, like accelerated death benefits and disability waivers. Comparison shopping for competitive life insurance quotes among the best life insurance companies may help you find the best coverage for you.
Does everyone need life insurance?
Whether or not you need life insurance depends on your individual financial goals. Many people use life insurance to ensure their loved ones – often young children or a spouse – are taken care of after they pass away. However, if you are single and don’t want to leave money to your family, a charity, a church or your business, life insurance may not be for you.