Moving on from your job? You’ve probably heard that you can roll over your 401(k). But did you know you may be able to hold on to your employer-sponsored group life insurance plan after leaving? Not everyone gets group life insurance as part of their benefits package. Those who do may or may not be able to take their policies with them when they leave. Here’s what you need to know about these policies and how converting, or “porting” them works.
Consider working with a financial advisor as you make critical decisions about how best to arrange the life insurance that best meets your short- and long-term needs.
How Group Life Insurance Works
Group life insurance doesn’t require a medical exam, a definite “pro” for folks in poor health, or who fear doctors. When you get group life insurance through your job, it’s part of your employee benefits package and doesn’t hinge on the state of your health. And if you sign up for group life insurance through a professional association or credit union, you probably won’t need to submit to a medical exam or answer questions about your medical history. The fact that you’re part of a group makes you a desirable customer in the eyes of the insurance company, regardless of the state of your health or lifestyle.
Group life insurance typically comes with relatively low premiums. Because the risk to the insurance company is pooled, the company can charge less for covering each member of the group. If your health is only so-so, the lack of a medical exam and the low premiums are the primary benefits of joining a group policy.
Insurance companies want to hang on to their customers. That’s why many offer what are called transferable plans. This feature is known portability or convertability.
What Happens to Group Life Insurance When You Leave Your Job?
Upon your departure, your employer must advise you of coverage termination. If the policy can be ported or converted, you must complete an application within a set period, typically a month or two, and file it with the insurance company. At that point you will be responsible for paying premiums directly to the insurer.
If your application for conversion is denied, it is important not to give up. ERISA, or the Employee Retirement Income Security Act of 1974, is a law established by the federal government that’s designed to, among other things, protect employees access to insurance. The government entity that enforces ERISA is the Employee Benefits Security Administration (EBSA), which is part of the Department of Labor (DOL).
In most denial cases, applicants are normally allowed one administrative appeal, so it’s important that the appeal is as carefully and thoroughly handled as possible. At this point an ERISA lawyer can be especially helpful.
Bottom Line
Access to group life insurance is a great employee perk. However, when it’s time to leave your job, it may not necessarily be worth paying to convert the policy. It helps to calculate how much insurance you’ll actually need, if any. That way you can make a more informed decision before committing. It’s also important to carefully check what you’ll have to pay in premiums to maintain the policy you had with your now-former employer.
Tips on Insurance
- A financial advisor can bring insight and guidance to insurance issues that you are facing. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use our free life insurance calculator to get a quick estimate of how much coverage you need.
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