How Long Does Life Insurance Last After Termination?
Life insurance is an essential financial planning tool that provides financial protection to your loved ones in case of an unexpected event. While many employers offer group life insurance benefits to their employees, it is important to understand what happens to your coverage if you leave your job. Here is what you need to know about how long life insurance lasts after termination.
Group Life Insurance Portability
If your employer’s group life insurance is portable, you can opt to “port” your coverage, paying your premium directly to the insurance company to keep your coverage in force. This is typically used when someone leaves their job or is fired and will have a gap in coverage. However, employer life insurance portability isn’t common — most employer-provided coverage simply ends when you leave your employer or shortly after.
If you choose to port your group policy, you’ll pay the premium yourself, and as time passes, you can choose to renew or end your ported coverage (typically on a monthly or annual basis).
Before porting your employer’s group life insurance, compare the potential cost to the cost of a standard term life insurance policy so you can see if it would make more sense to simply purchase your own term life policy. That said, you may decide to port your policy simply as a form of supplemental life insurance — this can help prevent a gap in coverage while you figure out your options.
Converting Life Insurance
Converting life insurance refers to converting a term policy to a permanent policy. Group life insurance typically comes in the form of renewable term life insurance that renews every year or so. These policies have a low death benefit and are highly affordable — they may even be fully paid for by the employer. Depending on your employer’s group policy, if you leave your job, you may have the option to port your coverage and then convert your ported term policy into a permanent one.
Since permanent coverage costs more than term coverage, converting will result in a higher premium, and you’ll be fully responsible for that premium. Before porting and converting, compare the potential cost with rates for a standard whole life policy. You may be better off simply purchasing a new policy, depending on the quotes and coverage you qualify for.
What to Do If You’re Terminated
If you’re fired or leave your job, your employer-provided life insurance will end, unless you have the option to port your coverage. When exactly your coverage ends will depend on the terms of your employer’s benefits. It’s often on your last day of employment or the last day of the month that you leave. And if porting is an option, it typically needs to take place within a month or two of leaving your job, depending on the policy’s terms.
To get life insurance coverage after you’re terminated, you’ll need to do one of the following:
- Find group coverage through a new employer
- Get individual life insurance
- See if you can port or convert your employer’s group policy
It’s important to understand your options and make an informed decision to ensure that you and your loved ones are financially protected. Consider speaking with a licensed insurance representative to help you find the right policy for you.
