What Happens to Your Life Insurance When You Leave a Job

If you’ve got a life insurance policy as part of your employer’s package of benefits, then you might be concerned that this will tie you to the same company indefinitely […]

If you’ve got a life insurance policy as part of your employer’s package of benefits, then you might be concerned that this will tie you to the same company indefinitely if you want to keep receiving cover.

There are quite a few things to consider and learn about in this context, so read on to get a fuller understanding of the life insurance implications of leaving your job.

Screenshot 2022 05 11 at 15.01.56
Image Source: Pexels

The Potential for Portability

A concept you’ll need to get your head around is life insurance portability. In brief, it describes the ability to remain part of an employer’s group insurance plan even if you move onto greener pastures.

In order to do this, you will of course need to pay the premium for the insurance on a monthly basis. This will typically have been handled by your employer in the past, and so it is an additional expense to weigh up.

A portable insurance plan is one which lets you retain all of the features and perks you received when working for the company that owns the group policy. Conversely, a converted plan is one which detaches itself from this group policy, effectively setting you up as a separate customer. Understanding this distinction is key to making the right decision when you get a new position elsewhere.

The Obligations of Employers

There is no specific law which requires employers to allow employees that leave to buy into the group policy as part of a portability package. Because of this, it’s worth checking if such an arrangement is in place before you take a role within any organization, as you may value this perk.

Of course employers recognize the appeal that life insurance portability brings with it, and so you’ll find that it is fairly common across the board.

The Options For Employers

Just because you are already on your employer’s life insurance plan, that doesn’t mean you should stick with it if you leave, even if portability is baked into your current contract.

There are a few reasons why you might choose to change, first and foremost because you will be able to take more control over the policy, and perhaps choose a package which is better suited to your needs and circumstances.

Secondly, you might be able to get a better deal with a different provider, which is all the more relevant given that you will become responsible for paying the premiums if you switch jobs.

Finally, you could be switching to a position at a new employer which has its own benefits package, including life insurance alongside other privileges. This would negate the need to stick with your previous plan.

The Role Of Research

Clearly the best way to work out what happens to your life insurance when you leave your job, and what route you should take going forward if any, is to do your research in advance and know what avenues are open to you before you hand in your notice.

You could find that taking advantage of a portable life insurance arrangement with your current employer is the most financially savvy option.

You could realize that you are better off going solo and picking a life insurance policy for which you are responsible. You could appreciate the advantage of moving over to the cover that your next employer provides.

However the chips may fall, you can only make an informed decision on your life insurance if you dig into the details and don’t brush this to one side. Given how important life insurance is to securing your family’s financial future, particularly for homeowners, this is not a process you can afford to ignore.

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