What Does It Mean to Port Life Insurance?

Life insurance portability is a feature available with group life insurance policies, typically those provided through an employer. It offers individuals an option to maintain their coverage when their group eligibility changes, such as upon leaving a job. This mechanism helps prevent a lapse in life insurance protection.

Understanding Life Insurance Portability

Porting life insurance means continuing your existing group life insurance coverage as an individual policy. This option primarily applies to group policies, such as those offered by employers, where coverage is typically tied to employment. When an individual leaves their job, portability allows them to transition that existing coverage into a direct policy with the insurer.

Portability ensures uninterrupted life insurance protection, allowing individuals to maintain their current coverage amounts without a gap. This differs from conversion, which leads to a different type of policy. Portability keeps the current term life coverage in force, with the individual directly responsible for premium payments.

Eligibility and Application for Portability

Eligibility for life insurance portability depends on specific criteria. The group policy must include a portability feature, as it is not universally available. Common requirements include the reason for leaving the group, such as job termination, and often, specific age limits, with some policies restricting portability for individuals over 69 or 70 years old. Some plans may also require the individual not to be disabled or to have been insured under the group policy for a minimum period.

Once eligible, the application process involves specific steps and strict time limits. Individuals typically need to contact their former employer’s human resources department or the insurance carrier directly. The process usually requires completing a portability application form, which often does not require a new medical exam or extensive health questions. Adhering to the application deadline is crucial, commonly a short window, often 30 to 60 days after the loss of group coverage. Failing to apply within this timeframe usually results in losing the portability option permanently.

Key Aspects of a Ported Policy

When a life insurance policy is successfully ported, it typically becomes an individual term life insurance policy. This means the coverage continues for a specific period, similar to the original group term policy, and does not accumulate cash value. The responsibility for premium payments shifts entirely to the individual, who pays them directly to the insurance carrier rather than through payroll deductions.

Premium rates for a ported policy are generally higher than the subsidized group rates the individual previously enjoyed. This increase occurs because the employer no longer contributes to the cost, and the rates are often based on the individual’s current age, increasing over time. A significant advantage of porting is that a new medical examination is often not required, allowing individuals to maintain coverage even if their health has changed. The policy transitions from a group contract to a direct individual contract between the policyholder and the insurer, with the death benefit amount generally remaining the same as the original group coverage.

Conversion of Group Life Insurance

Converting group life insurance is a distinct option from portability, allowing a policyholder to change their group term coverage into a permanent life insurance policy. This means the policy can provide lifelong coverage, unlike the temporary nature of term insurance. Permanent policies, such as whole life or universal life, also have the potential to build cash value over time, which term policies do not.

Eligibility criteria and timeframes for conversion are often similar to those for portability, typically requiring application within a specific window, such as 30 to 60 days after group coverage ends. A key benefit of conversion is that it usually does not require a new medical exam or underwriting, which is particularly advantageous if an individual’s health has declined. Converted policies generally have higher premiums compared to ported term policies due to the lifelong coverage and cash value features. Individuals might choose conversion if they desire lifelong protection, wish to accumulate cash value, or have health conditions that would make it difficult to obtain a new policy elsewhere.