When many people think about getting life insurance, they imagine benefits that may be offered by their employer. For many reasons, it’s important to consider coverage outside your employment offer. One critical issue? Understanding what happens to your policy when you leave your current place of employment. Is it possible to transfer or port your existing employer-sponsored plan to another policy? We will explore this question and other related issues in this article.
Portability gives you the option to move certain employee benefits, such as your life insurance policy, with you if you change employers.
Ways to Get Life Insurance
Many people secure a life insurance policy through two avenues: They secure a personal policy, or they enter into an employer-sponsored group policy.
Personal life insurance policies
Personal policies are ones you secure by contacting an insurance agent and enrolling in independent of your employment. This can be a good idea for many individuals, as they are less likely to be disrupted if you were to leave your job or if your employer decided to change insurance providers or benefits.
Additionally, with personal life insurance policies, you can pay the insurance company directly and you have more of a say in what type of coverage you can get based on your personal needs and goals.
Employer-sponsored life insurance policies
In general, employer-sponsored life insurance policies are offered as part of a compensation package. The employer, not the insured, controls what options are offered in exchange for paying part of the premium in many cases. Importantly, in many cases, your insurance coverage ends once you leave that job – unless you decide to
port your coverage.1 However, it is worth noting that not all employer group plans are paid by the employer, and may be sponsored by your employer instead – meaning there may be some differences in what is “paid for” by your employer – if anything is paid for at all.
What is Life Insurance Portability?
Portability gives you the option to move certain employee benefits, such as your life insurance policy, with you if you change employers. Additionally, portability allows you to change your group life insurance policy into a personal life insurance policy. To port your life insurance policy and make it a personal policy, you’ll begin by contacting the insurance company under the employer-sponsored plan, and in most cases, you will begin paying the premiums directly to the insurer.1
The length of your policy coverage (or the number of years you’ll be covered) may change, which is when you may consider converting your policy.
Understanding Life Insurance Policy Conversion
Conversion allows you to turn your term life policy into a whole life policy, which may be a good option for some individuals, especially based on age and health status. Like other whole life policies, these can cover you for your entire life rather than a specified term (number of years). In some cases, you may be able to convert your policy without having to qualify through a medical exam or questionnaire, but this is dependent upon the insurer.
Whole life policies often have additional benefits such as policy cash value, which allows you to draw money from your whole life policy while living. Converting your policy into a whole life policy may be a good option depending upon your personal situation.3
Final Considerations about Life Insurance Portability
Porting your existing employer-sponsored insurance plan to a private plan may be a good option for some individuals who want to keep their existing coverage. That said, you may want to consider skipping the administrative headache and getting your own private policy separate from your employer from the start. By doing so, you’ll be empowered to choose what coverage you receive and any other benefits such as life insurance policy riders.
When porting your life insurance plan, you might not be subject to medical examination or health qualification questions, as you are altering the contract on an existing policy, rather than getting a new plan. These rules vary from policy to policy, however. Be sure to check with your insurer to see what rules there are for portability and/or converting your existing policy form a term policy to a whole life policy.