When you leave a job, one important issue to sort through is what to do with your insurance coverage. You can continue health, dental and vision insurance through COBRA (Consolidated Omnibus Budget Reconciliation Act), but you may or may not be able to take your life insurance. If you can continue your life insurance policy, you can port it, which means continuing the same type of policy, or convert it, which means change it to a new type of individual policy. No matter which option you choose, you become responsible for the premiums.
Types of Life Insurance
There are two basic types of life insurance: permanent and term. Permanent life insurance policies are intended to be in place for life. Whole life policies are one type of permanent life insurance. Whole life policies have a level premium and death benefit and accumulate cash value, or savings. Universal life policies are also considered permanent policies. With universal life insurance, your premiums are flexible and your cash value may fluctuate as well. Term policies have level premiums for the term period (five years, ten years or more) and do not accumulate cash value. Group life policies are term policies, in the sense of not having any cash value. The premiums and the face amount of the policy, though, are based on the terms of the group life insurance policy your company has in place.
Porting your policy means continuing your group life insurance policy. It continues to be a term policy, and you become responsible for the premium. If your group's policy has other features, or riders, those may not continue. You may also be able to increase or decrease the face amount of the policy, depending on the terms of your group's policy. The premiums are less expensive if you choose this option rather than converting, but the premiums will go up as you age, and the policy may have an age limit, after which you can't renew.
Converting your policy means changing it over to a permanent type of policy. Normally, this is whole life, although some states offer or require universal life. Generally, you can covert up to the amount of coverage you had while you were working. The initial premium for whole life policies are more expensive than term policies, but the premium will stay the same, and the policy will continue as long as premiums are paid.
You can also choose not to continue the policy. If you don't have any dependents, there may not be a need for the continued life insurance. If you're married, you may be covered under a spouse's life insurance policy. You can also check into purchasing a policy directly from an insurance carrier, which may be more expensive and will involve underwriting. Underwriting is the process used to determine if you're an acceptable risk to an insurance company. This process may involve reviewing your medical records, having bloodwork and a urinalysis done at the insurance company's expense and, depending on the face amount of the policy and your age, getting an electrocardiogram and stress test, also at the company's expense. If you choose to purchase your own policy, make certain you've been approved before you let your group life insurance lapse.
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