You’ve Lost Your Job And Your Life and Disability Insurance

Many employees rely on their employers to provide them with life and disability insurance.  While these are nice benefits, it is risky to rely on your employment to provide them, because once you lose your job, you will likely lose the coverage.  If you are in that position, be sure to check your policies immediately to see if they offer you conversion options, sometimes also called portability.

This means that the insurance carrier agrees to allow you to start paying the premiums directly and keep the insurance.  Your time frame for choosing one of these options is often limited to a very short window, such as 30 days.  While it may be hard to swallow increased costs just after you’ve lost your job, you may regret passing up this insurance, because you will likely have a hard time purchasing replacement policies while you are unemployed (or may have to pay a higher premium to get them). Because of insurance coverage’s vulnerability to job loss, it is safest to obtain private life and disability insurance policies on your own – independent of your employer. There are also tax advantages to personally paying your disability insurance premiums instead of having your employer pay them.  These tax considerations can be explained by your accountant or tax advisor. Private life insurance and disability policies can be purchased through brokers and are often offered through professional organizations, as well. Be sure to shop around and read the policies carefully so you know what you are and are not getting.   For example, the better disability policies provide you with payments if you are unable to perform the job you hold at the time you obtain coverage; others only provide benefits if there is no job for which you are educationally suited that you can perform.   Disability policies may also limit the duration of their payments to you for certain types of disabilities.  Others provide you with the opportunity to attempt to return to work for a test period without jeopardizing your benefits.  Likewise, life insurance policies come in many varieties.