Life Insurance Conversion, The Forgotten Option – Employment and HR – United States – Mondaq News Alerts
United States:
Life Insurance Conversion, The Forgotten Option
21 March 2022
Masuda, Funai, Eifert & Mitchell, Ltd.
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When employees separate from employment, companies generally
remember to provide such employees with information about
continuing their medical, dental, and vision insurance coverages
under federal Consolidated Omnibus Budget Reconciliation Act
(“COBRA”) continuation coverage or the state equivalent
continuation program. In contrast, few companies remind separating
employees about the ability to convert their group life insurance
coverage into an individual policy without the need for medical
underwriting. For a separating employee with a medical condition
(high blood pressure, heart condition, etc.) or a life-threatening
condition, the ability to convert their employer provided basic
life insurance coverage may be the employee’s only possibility
to obtain or retain needed life insurance coverage.
When employer provided basic life insurance terminates due to an
employee’s separation from employment, the former employee has
the right to convert their employer provided basic life coverage
into an individual insurance policy without the need to undergo any
medical questions or exams. Former employees can apply for any
amount up to, but not exceeding the amount of life insurance
coverage they had under the active employee plan. To convert their
basic life insurance, former employees must generally apply within
30 or 31 days of their termination date, or the conversion right is
lost.
Although life insurance premiums for a conversion policy often
exceed the life insurance premiums available in the individual
insurance marketplace, this forgotten option becomes very important
for separating employees with a medical or life-threatening
condition. As a result, we recommend that all separating employees
be reminded of their right to convert their basic life insurance
coverage and the requirement to convert their coverage within 30 or
31 days of their separation date
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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