What Happens to Life Insurance When You Leave a Job?

When transitioning jobs, a common question arises about employer-provided life insurance. This coverage, typically a benefit, is usually tied directly to employment. Understanding its implications upon leaving a job is important for maintaining continuous financial protection for beneficiaries.

Understanding Employer-Provided Coverage

Employer-provided life insurance is typically group term life insurance, offered to employees under a single contract. It functions as a benefit, renewed annually and contingent on active employment. Unlike other forms, it does not accumulate cash value. Beneficiaries receive a death benefit if the insured passes away while the policy is in effect. Coverage typically ceases upon employment termination, though a short grace period, often around 31 days, is common, providing a brief window to consider options.

Converting Group Life Insurance

One option to retain coverage after leaving a job is to convert the group policy to an individual one. This is often a guaranteed option, meaning medical underwriting is not required, regardless of health status.

The conversion process usually has a strict timeframe, often requiring application within 31 days of employment termination, though some policies or state regulations might extend this period. The converted policy typically transforms into a permanent type of insurance, such as whole life or universal life, rather than remaining a term policy. Premiums for these individual policies will likely be significantly higher than the previous group rate due to the individual nature of the policy, absence of group subsidies, and lack of new medical underwriting. To initiate conversion, contact your former employer’s human resources department or the insurance carrier directly.

Porting Group Life Insurance

Another option is “porting” group life insurance, which allows you to continue the same type of group term coverage at an individual rate. This option often does not require new medical underwriting. Unlike conversion, porting maintains the term nature of the coverage.

Portability is less universally available than conversion and is not offered by all group policies. When available, it usually requires action within a specific timeframe, commonly 30 to 60 days after employment termination. Premiums for ported policies will be higher than the employer-subsidized group rate, as the individual assumes the full cost. However, these premiums might be lower than those for a converted permanent policy, given that ported coverage remains term-based. To pursue portability, contact your former employer’s HR department or the insurance carrier.

Obtaining New Individual Coverage

Beyond conversion or portability, you can always purchase a new individual life insurance policy from any insurer. This path offers various policy types, including term life, whole life, and universal life, each designed to meet different financial objectives and coverage durations. Term life provides coverage for a specific period, while whole life and universal life offer lifetime coverage and may include a cash value component.

The application process for a new individual policy typically involves comprehensive medical underwriting, including health questionnaires, a review of medical records, and often a medical exam. Insurers use this information to assess risk and determine eligibility and premium rates. While this process can be more involved, it allows for potentially more tailored coverage amounts and competitive pricing, especially for individuals in good health, compared to the often higher costs associated with conversion or portability. It is advisable to compare quotes from multiple providers and consider individual needs and financial goals before selecting a new policy.