Having a job with excellent life insurance benefits can seem like a dream come true. Knowing your family will be cared for if something happens can give you peace of mind. While this is great, what happens if you leave or are terminated from the job?
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Do you have any idea what your options are? You need to understand what can be done to ensure that your loved ones will be all set in the unfortunate event of your demise. Here is some information that will help you understand the next course of action.
How Soon Will Your Current Coverage End?
The first thing you will need to do is get in touch with the insurance company to find out what your options are. If you are lucky, the human resources department at your former job will supply you with all the information needed so you do not have to go on a treasure hunt to find contact information for someone who can help.
Typically, you have 30 days from the date you were separated from the job to decide what should be done. Doing nothing means the policy will lapse, and you will no longer be covered after this period ends. While that is fine for some, most people are not okay with walking around with no coverage.
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Table of Content
Exploring Your Options
To determine what to do next, you should probably have more in-depth knowledge of each option that is usually available. Here is a brief overview of several of the available options:
TRANSFERRING COVERAGE
This is not a common occurrence, but if you find another job quickly and they have the same company for life insurance, it is possible to switch your current policy quite easily. All you will need to do is contact the insurer and let them know the group number of your old employer and your new one.
Keep in mind that you will need to cover any premiums that are due in the interim. While COBRA laws require employees to cover separated employees for 18 months, this only applies to life insurance if it was offered as part of medical coverage. If it was not, then this financial responsibility would be yours alone.
INDIVIDUAL COVERAGE
The average person in the United States has an average of 12 jobs throughout their life.
In fact, more than 60% of workers have reported that they prefer to have the flexibility and do not like the idea of staying with one employer for too long. The main problem with this is the fact that hopping between different group policies is not ideal.
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If you are this type of person, you should probably plan and opt for an individual policy. This way, you will not lose coverage whenever you leave a job. In this case, your employers will have no part in the decision, and you will have to cover this cost on your own.
When an employer offers you a supplemental group policy, you can take advantage of this if you feel additional coverage may be needed. You can decline and continue to be covered by your policy. What you should do will depend on factors like how many people you support, the amount of debt you have accrued, and your net income.
This is probably one of the best options since individual policies tend to be more affordable than group policies, mainly since you can purchase individual coverage now and lock in a low rate for the duration of your policy. Still, when you apply for group coverage, premiums will vary depending on your age and health status at the time you sign up.
CASHING OUT YOUR POLICY
One option available to you when leaving an employer is to cash out the policy. Whether or not this is available will depend on the carrier and the type of life insurance policy.
If a group term life insurance policy covers you, you will not be able to cash out since this type of coverage does not accrue any cash value. On the other hand, you may have a cash-out option if a whole or universal life policy covers you. The exact cost will vary, and you need to discuss the amount you are eligible for with the carrier.
Once you have cashed out, it would probably be a good idea to put the money into an interest-bearing account since these funds were intended to be used by your family in case something happens to you. Another option would be to use this to pay your monthly premium on a new policy.
LETTING IT LAPSE
This is probably not an ideal option, but if you are separated from an employer and do not have another job lined up, paying some of the high monthly premiums common with group coverage can be difficult. It can be more cost-effective to look for an individual policy and allow this one to end once the grace period has passed.
You may want to keep the coverage if it is within your budget, but you can save a great deal by doing nothing and allowing the policy to end. It will ultimately be up to you to decide whether keeping coverage or letting it lapse is the most financially viable decision.
Now that you have all the facts available, it should be easier to determine your next course of action. Whether you decide to hold on to coverage, buy a new policy, cash this out or allow it to fade into the sunset, you can do so knowing that you carefully weighed your options and are making the right decision.
Good luck. 🙂
