Did You Lose Your Life Insurance When You Left Your Last Job?
What happens when you leave your employer but still want to keep your employer-sponsored life insurance policy? There are options available to help you hold onto this policy. However, these options depend on the insurance company and employer. In most cases, you likely have to convert your plan, but you can still hold onto your benefits.
How Employer Life Insurance Policies Work
Insurance policies from your employer are typically offered with other benefits, such as medical, dental, and a 401(k) plan. Employees typically have to select that they want these insurance benefits, so you may not have gotten a policy automatically. Employers offer life insurance help as a low-cost way to protect their employee’s families. So what happens if you get fired or decide to leave your job?
Should you buy your insurance policy through your job? Since life insurance help is offered through a sponsored plan, your employer is paying part of the cost. In other cases, your employer may pay all of the policy’s premiums. If you were no longer with the employer, then none of the benefits are paid for anymore. There are no laws requiring a former employer to pay for your coverage, even if you were laid off.
Options for Keeping Your Policy After Leaving a Job
One of the essential components of keeping your policy is understanding the terms in place. Unless your plan provides you with a transfer option or another way to keep the plan, you will likely have one of three choices:
- Cancel the policy
- Transfer the policy to another group plan with the new employer
- Transition the policy to an individual plan
When you head to a new job, you can talk to the HR department about the new insurance policy and whether you can port over the benefits from your last employer. If you are not able to port the policy over, you can typically contact the insurance company to switch over to an individual policy. However, this means that you will pay the premium out-of-pocket.
What Individual Policies are Available?
There are a few different policies available, such as a term insurance policy or a universal policy.
Term Insurance
These plans are for short-term protection and cost a little bit less than others. They typically last from 10 to 20 years, and you can upgrade them at any time to a long-term plan.
Whole
This plan builds more cash value over time and offers lifetime protection. You can access the policy at any time without paying any taxes. These policies typically allow you to pay premiums by the month, quarter, or year.
Universal
With flexible premiums, you get long-term protection and access to your funds without paying taxes. You can adjust your premiums as you need while building a future. These benefits also have tax incentives and build cash value that can be used to pay premiums.
Tips for Getting Insurance Coverage
Before you go shopping for a new policy, there are a few things you should know.
Ask About a “Free Look” Period
When you get a new policy, you still have time to cancel during the “free look period.” This is a certain number of days that you can make changes to your plan or even terminate the policy altogether. Some insurance companies only give you 14 days while others may give you 30 days, so it’s best to ask the insurance company before you commit.
Compare Similar Products
Every policy is different, but there are typically three different types as listed above. When comparing plans, you should make sure that you are comparing premiums for the same policy types.
What Do You Need to Protect
Insurance policies are designed to protect what matters most. So what would your beneficiaries need if you were to pass away? While permanent policies can unlock cash value over time, they should not be used as investments.
Your plan can help you cover the following:
Education Costs
Student loans do not go away after death. Even after a tragedy, you are expected to cover these costs. Insurance policies can protect you by paying off these loans and taking care of these financial burdens.
Rent or Mortgage
If you lose part of your income due to a death, then insurance policies can pay for these expenses. You can cover your mortgage, rent, and other bills necessary to keep your property.
Funeral Costs
Did you know that the average funeral cost is between $7,000 and $9,000? Your plan can cover these costs including burial services, transporting, casket, embalming, and preparation needs. Your funeral expenses can be fully covered with a good insurance policy.
Raising a Family
The USDA estimates that it costs $250,000 or more to raise a child to the age of 18. If you have multiple dependents, then your plan can cover these expenses, providing for your family even after you are gone. You can pay for childcare, health insurance, and much larger bills simply with cash from your policy.
Add Policy Riders If You Need To
When you choose a plan, you can ask the representative about types of riders that may also be available. These can change to meet your needs and budget.
Choose Reputable Companies
Before picking a company, you should check that they have a good reputation and will meet the needs of your family.
Converting Your Insurance to Permanent
Most insurance companies do not want to lose customers, and if you are let go from your job, you may be offered a transferable policy. This is particular to term insurance policies, so if you had short-term coverage or something else, then this probably will not work.
However, most insurance companies will convert your term insurance policy to a permanent or cash value plan. This is not always the best-case scenario if you are young and in great health, because your premiums will go up. You may also have to pay a fee to convert.
Instead, you could get a new term policy from the same company or a new one. It’s best to compare plans to get the coverage and premium that you want.
For those who have health issues, you probably want to keep the same policy so you keep your coverage. If you are afraid of being denied coverage, then this is the best way to keep your policy.
Will You Lose Your Policy If You Quit?
If you do not have any other options, then it’s possible you might lose your insurance policy. Your coverage will end after you leave your job, and you will need to apply for a new plan through your current job or on your own. Your new plan will consider your age and health status.
For those without any health conditions, this may not be a big deal. However, if you do have a health condition, then it could be difficult to find a new, affordable policy. You may not be able to qualify for coverage. This is why many people carry additional insurance policies on their own so that they do not have to depend on their employer.
Wherever you are at in life, make sure that you’re covered with an insurance policy that’s going to work for you. Contact us at WRS Solutions to get started.
