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Decades ago, the average person would hold between 3 and 4 jobs in their lifetime. Now, with modern advances, job-hopping is the new trend for millennials in the work force. According to the Bureau of Labor Statistics, the average worker today will only stay with the same employer for an average 4.4 years.
If you were to do the math, this statistic means that the average employee will hold anywhere from 15 to 20 jobs in their lifetime, creating some dramatic changes in their life after every transition. With a new job comes a loss of old benefits and the option to carry new benefits, which often includes some form of group life insurance. If you and your family are heavily relying on your life insurance benefits that you have purchased from work, your might be wondering just what happens to those benefits after a career change. Read this guide to group life insurance, and learn everything that you need to know.
What is group life insurance
When you carry life insurance, it will be one of two types: an individual plan or a group plan. Group life insurance is insurance that is sold to an employer or association who will then offer their employees or their members the option to take advantage of a benefit package. The employer will purchase the insurance at wholesale prices so that the premiums stay rather low. Some employers may even offer the benefits to their employees without charging any out-of-pocket costs, and others will allow their employees to select a benefit amount and then have the premiums deducted directly from their paychecks.
How does group insurance differ from individual insurance?
You can only receive or purchase group insurance benefits if you work for an employer that offers this as part of their benefits package. If you are self-employed, unemployed, attending school, or work part-time, you probably will not be eligible for a group term life benefit. If, however, you are employed full-time with a company that offers a coverage plan, it is a convenient way to buy insurance without having to worry about answering any medical questionnaires or taking any types of medical exams. You will receive either a flat amount of coverage or a percentage of your salary and having pre-existing medical conditions cannot affect your ability to buy coverage.
The employer will own the policy and you will be the named insured.
Individual insurance is very different because it is designed for anyone who qualifies. If you are not eligible for group life insurance, or your employer does not allow you to buy enough coverage, buying an individual policy is the best alternative. When you choose to secure an individual policy, you will pay the market rates instead of paying wholesale prices. Your employer does not own your policy, choose the insurer or even have a say in how much coverage or what type of insurance you can buy.
You are free to shop the market, compare various types of term and permanent insurance, price benefit amounts, and shop riders on your own. With this freedom comes an obligation to prove that you are insurable. While not all individual life companies do ask medical questions or require exams, a majority do. Pre-existing conditions are a major part of the individual insurance underwriting process that is not a part of the issuance process for group plans.
How long can you carry group life insurance?
Many people assume that they are protected if they are carrying life insurance through their work but not choosing to carry an individual plan. It may seem like a safe assumption, but some people just do not think about scenarios where they could be left uninsured and uninsurable. Relying solely on your group life insurance to provide your family with the finances that they need when you are gone can be very risky and very dangerous because of how it works. In most cases, unless you have a pension, you will only have life insurance for as long as you are an active full-time employee with the organization. The moment that you go under a certain number of hours or leave to pursue a better opportunity, you lose that life insurance benefit.
Are there laws that protect you from losing your benefits package?
There are government programs and laws like COBRA in place that make it possible for employees to keep their medical insurance benefits, but no such laws exist for life insurance. This is why it is imperative that you know what is at risk when you are changing jobs and what you can do to avoid losing your coverage.
What are some scenarios where you will lose your benefits?
There are several different events that can happen in life that could force you to leave your job or even exit the work force for good. One of the most common reasons to leave an employer is to take advantage of a new opportunity, but changing jobs is not the only scenario where you could face losing coverage. Here are some scenarios where you could fall victim to coverage loss and be vulnerable to living a life without any insurance at all:
- You retire from your employer: You will lose coverage and may still have a need for financial or final expense protection.
- You are fired or laid off: You have no control over this and have no opportunity to plan ahead when loss of a job is sudden.
- You move to another region: Relocation can lead to transitions in life that leave you uninsured when you have even more financial obligations than before.
- You go from full-time to part-time: Some employers have requirements that state that you must work over 30 hours per week to receive benefits. If you choose to work part-time or your hours are reduced, you can lose those benefits.
- Your employer chooses not to offer insurance: Companies pay a portion of the life premiums, and this can become expensive. Since the employer is the owner of the plan, they can change the plan or eliminate it without your say leaving you uninsured.
Is there anything that you can do to save your life benefit?
There may not be any federal laws in place that protect your life insurance like those that protect your medical coverage, but some companies buy plans that are convertible. If there is a conversion privilege built into the plan, you will have a period of up to 30 days to apply for an individual plan through the same insurer up to the coverage benefit that you carried. You must submit your application before the deadline is up once you are not an employee.
Your premiums will be based on your age, but the good thing is that your health typically is not taken into account.
For those who cannot medically qualify for insurance, converting a group insurance plan to an individual plan is the best alternative. Be sure to review the state laws concerning convertibility if your contract does not mention this or your HR department cannot answer your questions.
What are some alternatives to losing your life benefits
You do not want to reject a great job offer just because you have life insurance through your current employer and your new employer’s benefit package will not kick in for 90 days. There are alternatives that you can exercise that allow you to take the job and stay fully insured.
Buy an Individual Policy
One of the best alternatives to choosing to take the risk and live life uninsured is to buy yourself an individual insurance policy. It is always great to have a group life benefit, but anyone who wants constant protection without having to worry about lapses should consider group insurance to be supplemental in nature. You should see an individual policy as a primary one and then elect to carry the affordable group plan when it is offered. This is of course only when you can qualify for a traditional policy.
Buy a Temporary Plan
There is also the option to buy a specialized product that does not require underwriting just to satisfy your temporary needs. This is a better option if you have a medical condition or you are older and cannot qualify for a standard plan. The insurance may be expensive, but if you are only waiting until your other plan starts, you can manage the expense. Some might even negotiate that their new employer cover the cost as part of their agreement.
Now that you know what happens when you change jobs, it is time to start shopping for an insurance plan. To find the best rates, use an online rating tool that connects you with the best insurers. Research the insurers to pick the best ones and you will be covered even if you switch your jobs or change careers. Start comparing life insurance plans by entering your zip code in our FREE tool below!