Can you Keep Employer-Sponsored Life Insurance If You Change Jobs?

Can you Keep Employer-Sponsored Life Insurance If You Change Jobs?

by Kim Pinnelli
Senior Contributing Writer

February 1, 2020
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Many employers provide employer-sponsored life insurance. It’s often an inexpensive way to get coverage for your loved ones if you die prematurely.

As a part of the benefit, many employers pay a portion or all of your premium while you are employed. If you leave the job, whether you are fired or you quit, your employer won’t pay the premiums any longer. Does that mean you lose your coverage?

Converting your Insurance Plan

As you change jobs, you’ll have many decisions to make beyond where you’ll work next. You have to manage your 401(k) and decide what to do with employer life insurance after termination. If you do nothing, the policy terminates and you move on with your life.

However, you may have the option to convert the policy – which is what most insurance companies are hoping for, in an effort to keep you on as a customer. When we say convert the policy, though, you aren’t converting from one term policy to another. Instead, you’re converting the term policy into a permanent policy.

What Should You Do?

So what’s the big deal if you go from a term policy to a permanent policy, right? There are many differences. For one, the cost will be much higher. Not only will you pay higher premiums, but you must also pay the conversion fee.

Can you get another term life insurance policy? In other words, are you healthy and young? Will insurance companies willingly give you a new policy on your own? Then it makes more sense to ditch the employer-sponsored policy and get your own policy.

If you can’t get a term policy on your own either because you are older or have a chronic illness, you may want to hang onto the group policy protection that can’t discriminate against you. Keep in mind, your premiums will get much higher and you’ll pay fees for converting to the new policy. Make sure you know the ins and outs before making a decision.

Should You Go Without Life insurance?

If you are changing jobs and your new employer has a waiting period before you are eligible for their group life insurance policy, you may want to consider a policy in the meantime. Do you want to take the chance of being without life insurance? Most people supplement the insurance coverage their employer offers anyway. If you already have a policy to back up your ‘free’ policy from your employer, then you’re in good hands. If you have no coverage, though, it’s best to find an affordable policy that can at least get you through the period that you won’t have any coverage.

Employer-sponsored life insurance typically offers fairly low coverage as it is. Even if you have coverage, you may want to consider your other options to supplement it. If you do leave, you’ll have proper coverage without your employer. If you don’t have the coverage, it’s important to make wise decisions about your employer life insurance after termination.

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