Some employers offer group life insurance as a benefit for employees and their families. When certain trigger events occur, like leaving the company, employees may be able to keep this coverage by porting their life insurance policy. In some cases, however, there are other options that make more sense to ensure you and your family have enough coverage.
When you lose employer-sponsored life insurance, you may want to switch the same policy to your own name rather than through the company. The death benefit amount does not change, and you may still be eligible for the group rate. However, your premium payment could change if your employer was covering part of the cost. If that's the case, you’ll end up paying more than you used to for the same amount of coverage. It’s not that the price went up—it’s just that you’re now responsible for the full amount.
Here are common trigger events that could open the door to porting a life insurance policy:
- You leave your job
- Your spouse leaves their job and loses coverage
- Employer stops offering this benefit
- You get divorced
In many cases, it may make sense to start a new policy in your own name, rather than porting over a company policy. Ethos offers affordable term life policies that may offer better benefits at a lower cost than sticking with the policy your previous company provided.
How to port your life insurance policy
Start by checking with your human resources department and your life insurance company on what steps you should take to port your policy. Watch out for time constraints, which are typically within 30 to 90 days of ending your employment. Once you port your policy, payments go directly to your insurance company rather than having them deducted from your paycheck
Most employer life insurance policies range between $20,000 to $50,000. This may not actually be enough for your beneficiary to cover your final expenses, debt, and lost income. How much life insurance do you need? A quick rule of thumb is to multiply your annual salary by 10. But you can also quickly add up your mortgage, other debt, education expenses for your kids, and a certain amount of income you want to leave behind.
If you’ve had major life changes, like the birth of a child or a divorce, this is a good time to reevaluate the size of your death benefit. Depending on the cost, portable term life insurance may work better as a supplemental policy rather than the bulk of your coverage.
Life insurance portability vs. conversion
When you are leaving a company and exploring the portability process for your life insurance, you may be able to convert it instead. Instead of locking in your term and death benefit at its current group rate, you instead convert your policy from a term policy (which expires after a set period of time) to a permanent policy. That way, you get coverage until you pass away, regardless of age.
Here are the key differences between these two options.
Cost and type of policy
Porting is typically less expensive than converting because you’re locking in the group life insurance rate from your company. Plus, these policies are typically term, meaning they only last a certain number of years. Converting a policy is more expensive because your coverage lasts for your entire life.
Medical changes
Portability may not be allowed if you have an illness or injury that reduces life expectancy. With a convertible policy, however, you could still get coverage in this situation—you would just need to pay higher premiums. Each insurer has its own requirements, including whether or not you’ll need a medical exam in order to port or convert your policy.
When to buy a new life insurance policy
For many people, it may be worth shopping around for an entirely new life insurance policy. Ethos, for instance, makes it easy to get a quote by filling out a short online form. Plus, you don’t have to worry about a medical exam (just answer a few health questions), even if you’ve had changes to your health since you enrolled in your group life insurance policy. Just like any financial decision, it’s smart to compare multiple options so you can find the best one.
Bottom line
Major changes in life can cause you to reevaluate many aspects of your financial situation. Life insurance is an important area to pay attention to so that you always have the right amount of coverage for your family. When you leave a job, portability might give you a nice discount by keeping that group life rate. But if your employer no longer covers a portion of the premium or you realize you need more coverage than the current plan offers, then it’s time to look around at other options.
Ethos offers a great starting point to compare multiple levels of online life insurance coverage. Start applying.
FAQs
Portability or porting is an optional feature chosen by your former employer. It allows you and your dependents to continue their Group Term Life and Accidental Death and Dismemberment (AD&D) insurance under a separate policy.
How does porting life insurance work? ›
How does porting employer life insurance work? If you choose to port your group policy, you'll pay the premium yourself, and as time passes, you can choose to renew or end your ported coverage (typically on a monthly or annual basis).
Can life insurance be taken out on someone without their knowledge? ›
No, you cannot buy life insurance on another person without their knowledge or consent, even if they are your parent. As the insured party, your parent may need to undergo a medical examination to determine what coverage they qualify for, the death benefit, and the premium.
How can I port my life insurance policy? ›
How to Port a Term Insurance Policy?
- Step 1: Submit a written request to your insurer regarding portability at least 45 days before the policy renewal date.
- Step 2: The submission will be followed by some paperwork, which includes a portability form and a proposal form from the new insurer.
Portability is a policy feature that provides the option to continue coverage for an insured and their covered dependents after it would otherwise end. The coverage shifts (or "ports") from being part of a group policy to being a standalone individual policy.
What is the purpose of portability? ›
Portability is a way for spouses to combine their estate and gift tax exemptions. More specifically, it's a process where, after the first spouse dies, the surviving spouse can transfer (i.e., “port”) the unused estate tax exemption of the deceased spouse to himself or herself.
How does the porting process work? ›
This process involves submitting a port request to your new provider, who will then handle the transfer with your current provider. During the transfer, your service may be briefly interrupted, but this is usually minimal. Once the port is complete, your new service provider will activate your phone number.
What are the benefits of porting? ›
Reasons Why You Should Consider Porting Your Health Insurance Policy
- Get a Better Insurance Provider. ...
- Get a More Competitive Insurance Premium. ...
- Switch to an Insurer With a Wide Network of Hospitals. ...
- Option to Switch to an Insurer With a Better Claim Settlement Ratio. ...
- Carry Forward Your Accumulated Cumulative Bonus.
In most cases, your policy's cash surrender value will be paid in a lump sum. Depending on your policy, however, you may receive periodic payments over time. To determine what that value is and how it is paid out, you have to look at your policy contract, which should spell out all those details.
Can you access your life insurance while alive? ›
The short answer is that life insurance living benefits provide you with access to funds from your policy's death benefit while you're still alive.
Key Takeaways. The cash value in your whole or universal life insurance policy can come in handy when you need funds for large, ongoing or unexpected expenses. There are four ways to get the cash from your policy while you're still alive: borrow, withdraw, surrender, or sell.
Can someone make you a beneficiary without you knowing? ›
If you've lost a family member or close friend, you may be listed as a beneficiary without even knowing it. Suppose the deceased didn't have a partner or children to name on their policy; they might have branched out to other relationships when choosing the beneficiary of their life insurance policy.
Is it better to convert or port life insurance? ›
Conversion may be a good solution for employees who are leaving a job, reducing hours, retiring, or have reached an age when group coverage may be reduced or eliminated. Converted coverage is permanent individual life insurance.
What is portability in life insurance? ›
Portability allows eligible insured employees to “port” (or buy) Group Life insurance coverage when they are losing coverage because their coverage is being voluntarily or involuntarily terminated. The portable group insurance coverage offers group term Life, Accidental Death and Dismemberment (AD&D).
How do I transfer ownership of a life insurance policy to another person? ›
You can request a transfer form directly from your life insurance company. However, you may also have to change the policy to indicate that the insured is no longer the owner. After the transfer, the new owner is responsible for making all premium payments.
What does "portable" mean for life insurance? ›
Portability allows eligible insured employees to “port” (or buy) Group Life insurance coverage when they are losing coverage because their coverage is being voluntarily or involuntarily terminated. The portable group insurance coverage offers group term Life, Accidental Death and Dismemberment (AD&D).
What is the purpose of insurance portability? ›
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law that required the creation of national standards to protect sensitive patient health information from being disclosed without the patient's consent or knowledge.
What is a portability option? ›
Portability means, within your term, transferring your existing mortgage (rate and product terms) over to a new property. You stay with the same lender, allowing you to continue along your (mortgage) way without breaking your contract and paying a sometimes costly penalty.
What is the meaning of portability in insurance? ›
Portability is the option to move certain employee benefits along with you if you change employers. Health insurance benefits are made portable through HIPAA legislation and COBRA continuation of coverage.
