Understanding Your Life Insurance Options Before You Leave Employment

Whether you’ve worked at the same company for years or only a short time, you may be enrolled in a group life insurance plan. Many employers offer life insurance coverage as part of their employee benefits. However, if you plan on leaving your current employer for a different company, you may lose coverage completely and need to enroll in a new plan or individual life insurance policy.

To help you understand what happens to your group life insurance after you leave employment, here are the differences between group plans and individual policies:

Group Life Insurance:

Employer-sponsored life insurance is a single policy that covers an entire organization. In most cases, your employer will act as the policy holder and pay the premium on basic coverage. Coverage can vary, but basic plans cover at least two times your annual salary. Employers may also give employees the option to purchase supplemental group life insurance. This means you can purchase additional coverage through the same group plan.

Individual Life Insurance:

In its simplest definition, individual life insurance is coverage that you purchase on your own. It is not based on your employer and usually carries less limitations than a group plan, meaning you can exchange policies. There are multiple types of individual policies available, including fixed, variable, and term life insurance. This type of plan can offer tax benefits but may require a medical examination.

Now that you understand the basics, here’s a few things you need to know before leaving your employer:

  • Cancellation: In most instances, your coverage will remain with the employer. This means that when you leave a company, your life insurance stays behind. And if you had purchased additional coverage through the company’s group plan, you lose that coverage as well.
  • Conversion: Depending on the type of group plan, you may be able to convert your coverage to an individual policy. There is usually a small window of time for this, and it typically costs you a higher premium that you’ll need to pay out of pocket.

Although a group plan is both a convenient and affordable option, having an individual policy is a great financial planning strategy to ensure your loved ones are covered for the unexpected. And even if you’re enrolled in a group plan, you can still purchase an individual policy that stays with you, regardless of your employer.

To learn more about individual life insurance, contact the independent financial advisors at Focus Financial. We offer a variety of financial planning services, and our independent financial planners will help you find the best policy to suit your family’s needs. Contact Focus Financial today to schedule a free consultation.

Skip to content