If you have life insurance through your employer, you may wonder what happens to the policy when your employment ends. If your life insurance is portable, that means you can take it with you when your employment ends, in effect remaining a member of the group for insurance purposes. Portability is different from conversion of an insurance policy, and the specifics of portability can vary among policies and employers.
Features
Many people have the opportunity to purchase life insurance through their employer. This is often group life insurance, which is typically less expensive than individually purchased policies, and term insurance, which is typically less expensive than whole life insurance. When you leave your job, if your life insurance is portable, you can keep your coverage although the amount of coverage and premiums may be different.
Benefits
One of the benefits of portability of life insurance is that your coverage does not lapse. Because your coverage is uninterrupted, you typically will not be required to provide evidence of insurability to the insurance provider to maintain your coverage. This is especially beneficial if any you have a medical condition that developed after your coverage first began. You can continue to pay your premium at the group level, which may represent a significant savings over purchasing a policy as an individual.
Time Frame
Once your employment ends, you will have a limited amount of time to activate the portability provision of your life insurance policy. This can vary from employer to employer. Expect the time frame to be one month or less, and expect to be required to give notice of your intention to exercise the portability provision in writing to the employer, insurance company or both. The frequency with which you will be expected to pay your insurance premiums may also vary.
Changes
The amount of coverage you can keep in force under the portability provision may be less than you had under the group plan. The amount of your premium will probably change, too. Life insurance purchased on dependents may not be portable.
Considerations
Portability of life insurance is different from convertibility. Convertibility allows you to change term life insurance to whole life insurance; some policies may be convertible even if you are not leaving your job. Any time there is a change in your financial status, as when you leave a job, you should review your financial situation and make sure your insurance needs are addressed.
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