Life
5 min read

What Happens to Your Life Insurance if You're Laid Off?

Written by
Team Waffle - Ryan
Published on
July 26, 2022

Having a life insurance policy as part of your employer-sponsored benefits can be a low-cost way to provide supplemental protection for those who rely on you financially. But what if you lose your job or accept a new position with a different company? Will you be able to bring your life insurance policy? That is dependent.

Workplace life insurance is typically provided through a company's group life plan. While plans vary, in many cases, these benefits are provided to all employees, with the employer covering a portion or all of the policy's premium. As a result, if you leave your current job, you are no longer covered by the company's group plan, and your former employer is not obligated to pay for your coverage.

What happens to life insurance when you leave a job?

The short answer: when you leave your job, you lose your group life insurance. The long answer is, however, more complicated. When these kinds of policies are offered as a benefit of working for a company, the policy itself is held by the company, and the employees are the only ones who can be insured under the policy. This means that the only people who can join the group plan are the people who work for the company that bought the policy. So, workers who leave that company are no longer eligible for a group plan like this.

But there are ways around the problem. In the American economy, changing jobs is becoming more common, and insurance companies have made some changes to keep up.

What can you do with your life insurance when you change jobs?

First things first is to find out whether you can take the life insurance policy with you. Ask HR if this is possible and if not, you can cancel or let your policy lapse. Here’s some more info.

  1. You can cancel your policy or let it lapse: Group life insurance usually expires about a month after you leave your job, so it effectively cancels itself. To avoid insurance gaps between jobs, it is generally best to plan for the transition from an old job to a new one by arranging for employee life insurance coverage to begin as soon as the previous one is canceled. Group life insurance usually expires about a month after you leave your job, so it effectively cancels itself. To avoid insurance gaps between jobs, it is generally best to plan for the transition from an old job to a new one by arranging for employee life insurance coverage to begin as soon as the previous one is canceled.
  2. You can ask HR if the policy is portable: This is not recommended in most cases. Most employer-provided group life insurance is not portable, which means that coverage does not follow you when you change jobs. If you are able to port your group policy to an individual term life policy, your rates will almost certainly be higher than your original premium.
  3. Convert your group policy into an individual one: Again, not your best option. Although it could be convenient, this option will almost always be more expensive as you're taking the group policy rate which is always higher. 

Should I get life insurance through my job?

Although there are some advantages to having life insurance through your job, the disadvantages really outweigh the pros. Some of the benefits of employer supplied life insurance:

  1. It's typically free or subsidized through your employer
  2. You don't need to supply medical info to qualify
  3. In addition to the base, you might be able to add more coverage on top
  4. If you leave your job, you might be able to convert it from group to individual. 

Some of the disadvantages:

  1. In general, the coverage amount is much less than what you would typically need leaving you underinsured. 
  2. Because it’s designed for groups, getting any type of personalization is a no go. Getting the actual benefit you would want or features that would be most ideal for your family are going to be near to impossible.
  3. If you leave your job or get laid off, most of the time your group life policy isn’t transferable, portable, or convertable.

Here is something to think about. If you get life insurance through your job when you're 25 and you're at that job for say 5 years and your next employer doesn’t offer life insurance, it is up to you to get an individual plan. The salt in the wound is that life insurance premiums go up every year as you age so if you would have bought an individual plan at 25 vs the now 30, you would have saved $20 - $35 a month. Also the more you age, the more health risk potentials you could have which may increase the premiums significantly vs getting a policy before knowing any health risk existed. 

Frequently Asked Questions

What is Waffle’s life insurance process?

We try to keep things as easy, transparent and efficient as possible. You can get a quote entirely online in about 5 minutes and you don’t need a medical exam for coverage under $3 million. Our insurance provider has been around for over 30 years so even though Waffle is relatively new, you can have security knowing your policy isn’t going anywhere.

Does everyone need life insurance?

The need for life insurance is determined by your personal financial goals. Many people buy life insurance to ensure that their loved ones, usually young children or a spouse, are taken care of after they die. However, if you are single and do not wish to leave money to your family, a charity, a church, or your business, life insurance may not be the best option for you.

When should I get life insurance?

There are certain times in life when life insurance starts to become a much bigger deal to have. The most major life events that should make you think about getting life insurance are things like:

  1. Getting married - If your family is dependent on your income, life insurance helps to ensure your wife wont have financial stress
  2. Buying a home or a car - Large purchases usually mean large debt. Life insurance helps alleviate these debts so your family doesn’t have to be stuck with them.
  3. Having a child - Children are expensive. Life insurance is often purchased to help protect things like tuition, childcare, schooling, etc.

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