What Happens to Life Insurance When You Leave a Job?

If you rely on employer-sponsored life insurance, your coverage will likely end when your employment does. Most group life insurance policies include an "actively at work" clause, meaning your coverage depends on continued employment. This can leave your family without financial protection during a career transition.

Group life insurance through an employer (also called employer-provided life insurance) is convenient and often free, but it comes with limitations. Coverage amounts are typically capped at one to two times your annual salary, which may fall short of what your family actually needs. If you have a mortgage, children or other dependents, this gap could create serious financial strain.

Many group policies allow you to port or convert your coverage to an individual plan. You can also buy a private life insurance policy at any time.

You have three options when employer coverage ends: port your existing policy, convert it to permanent insurance or buy a new private policy. Here's what each choice means for you and your family:

Porting lets you keep your group coverage by paying premiums directly to the insurer instead of through your employer. Your coverage amount and terms stay the same. Contact your Human Resources department to confirm if your plan allows porting and request the required paperwork before your last day.

Most employers give you 30 to 31 days from your last day of work to elect portability or conversion. Missing this deadline means losing your coverage permanently. Review your policy documents for exact deadlines.

A few states also have group life insurance continuation laws, which may extend your options. Check your state regulations or consult insurance professionals.

Converting turns your group term coverage into an individual permanent policy, such as whole life insurance. The insurer bases your new policy on the coverage amount you had through work. You won't need a medical exam, but permanent policies cost more than term insurance.

Buying your own term or permanent life insurance gives you full control over coverage amounts, policy length and beneficiaries. The application requires health information, and you may need a medical exam depending on the coverage amount. Approval can take two to six weeks, so apply before your group coverage ends to avoid a gap.

Your employer-sponsored life insurance usually ends when your job does. If you're healthy, a private term life insurance policy often offers better value than porting or converting group coverage. If health issues make new coverage expensive, porting or converting may be your best option.

Start shopping for private coverage before you leave, since approval can take several weeks. Compare life insurance quotes from multiple insurers to find the best rates for your situation.

Here are answers to common questions about life insurance and job changes.