Portable Life Insurance Policy
COVID-19 has created a lot of unemployment, but even before that, no job was permanent. Losing a job does not only mean losing the benefits of a paycheck, but it also ends with the benefits your employer offers, including pension benefits, 401K, insurance coverage, allowances, yearly bonus, and much more. In this article, we discuss the portable life insurance policy.
Most companies provide employer’s insurance coverage to their employees. An employer’s life insurance coverage plan includes a conversion and portability option. This means that on being terminated from the job voluntarily or involuntarily, an employee can either convert their coverage to an individual whole life insurance policy or port it to another group term insurance policy.
Let’s Discuss Portable Life Insurance Policy
In this policy, employees can convert their group life insurance policy to the personal term life or accidental death and dismemberment insurance policy. This policy is only for a certain period, where the employee has to submit a policy premium amount directly to the carrier. The premiums of this policy are generally low. However, you cannot take loans or receive a cash refund if you surrender the policy. However, after the death of the employee, the benefit is paid to their beneficiary, which usually includes a spouse, adult child, family member, or trust.
Employees are eligible for portability insurance regardless of their health condition, as long as they are available after their previous coverage has ended, usually 31 days after the end of prior coverage.
Eligibility Requirements for a Portability Insurance Policy
The following are the eligibility provision for a portability insurance policy:
- An employee should be under the age of 70 years
- The employee must have been insured continuously for at least 6 months (under the employer’s insurance plan)
An employee should be able to perform the duties of at least one occupation.
Benefits an Employee Gets After Portability
● Term Life
● Accidental death and dismemberment
How “Portability” is Different from a “Conversion” Policy
In a conversion insurance policy, an employee can convert coverage to complete life insurance coverage until death or maturity date. Unlike portable insurance coverage, the premium amount of this policy is a lot higher. As opposed to the term or portable life insurance coverage, a whole life insurance coverage or conversion insurance policy pays a guaranteed cash value to the insured employee after a certain time period or death of the employee.
An employee can also take a loan against their balance; however, in the portable policy, an employee cannot credit their balance. The conversion insurance coverage is broader than the portable coverage in most of the aspects. Still, with conversion, the employee gets the benefits of life only. However, portable coverage converts benefits related to both term life, accidental death, and dismemberment.
Eligibility for a Conversion Policy
The eligibility criteria for the conversion insurance policy is different from the portable insurance policy. The following are the requirements for an employee to take conversion insurance coverage:
- He or she must insure under the employer’s group insurance policy
- The insurance of the employee is ending or reducing, and
- The employee is not losing the employer’s coverage due to the non-payment of the premium.
