Many companies provide life insurance as a benefit. If you work at such a company and are considering leaving, there are a lot of important factors that needed to be sorted out before you do. One of those factors is what you should do with the life insurance coverage that they have provided for you.
You will have two options: you can continue your life insurance, or you may be able to take it with you; however, not all companies offer the option to take your insurance coverage with you. If you are given the option to do so, you would be eligible to “port” your policy. Alternatively, you can convert the policy; or change it to a new, individual life insurance policy. Whichever option you choose, you are responsible for paying the premiums, as your company will no longer pay them since you will no longer be their employee.
Confused? Keep on reading to find out more about what it means to curb and port your life insurance policy and what the difference between each option is.
Porting Your Life Insurance Policy
As mentioned, porting your life insurance policy means that you have decided to continue the policy that your company has granted. The only type of policies that can be ported are term life insurance policies. The reason being that any coverage a company offers is considered a group life policy. These policies do not have any cash value, meaning that you will not be able to collect any cash from the policy; instead, the beneficiaries that you have listed will receive the death benefit of the policy when you pass away.
If you are leaving the company you work for, if you decide to port your life insurance policy, it will continue to be a term life insurance policy. You will be responsible for paying the premiums on your policy, as you are no longer an employee of the company that offered the coverage as a benefit.
If there are any additional features on your policy, or riders, if you decide to port the policy, they may or may not remain effective. You may have the option to increase the value of your policy, or you may be able to decrease the value; however, it will depend on the terms of your group policy.
Converting Your Life insurance Policy
Converting your life insurance policy means that you have decided to change the group, or term, life insurance policy that your company offered to a permanent policy. Typically, it will be changed to a whole life insurance policy; however, some states will allow you to or require you to convert it the term policy to a universal life policy.
Typically, you will be able to convert up to the amount of coverage the policy provided while you were employed with the company.
Porting or Converting: Which Should You Choose?
It really depends on your unique needs, as there are benefits and disadvantages to both.
If you decide to port your policy, the premiums will be less expensive than if you decided to convert it. However, you will only receive coverage for the term of the policy (if the term was 30 years and you worked for the company for 15 years, the coverage will only be effective for 15 more years). The premiums for porting your life insurance policy will be lower than if you decide to convert it; however, they will increase as you age. Furthermore, there may be an age limit for the policy, and once you exceed that age limit, you will not be able to renew it.
IF you decide to convert your policy to a permanent life insurance policy, the premiums will be more expensive. However, the premiums will remain the same and you will continue to receive coverage until you pass away, as long as you continue to pay the premiums.
If you are not sure which option to choose, speak to a reputable insurance agent. Together, you can assess your individual needs and your existing group insurance policy to determine whether porting or converting your policy would be in your best interest.
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