Group life insurance is a common benefit offered by employers to provide financial security for employees and their families. This coverage is often contingent on employment, and employers are not legally required to maintain group life insurance policies indefinitely. However, employers must comply with standards laid out by The Employee Retirement Income Security Act of 1974 (“ERISA”).
Below is a breakdown of what typically happens when an employer terminates group life insurance, what options employees have, and how they can protect themselves.
1. Immediate Loss of Coverage
Once a group life insurance plan is terminated, all participating employees usually lose their coverage. The termination may be effective immediately or after a brief notice period, depending on the employer’s policies and the terms of the insurance contract.
- Notification: Employers are typically required to notify employees of the termination, but the timing and method of notification may vary.
2. Conversion to Individual Policy
Many group life insurance policies include a conversion privilege. This allows employees to convert their group policy into an individual life insurance policy without undergoing a medical exam—usually within 30 or 31 days of the group coverage ending.
Employees who are older or have pre-existing health conditions may find this option especially valuable.
3. Portability Options
Some group life insurance plans offer portability, which lets employees continue their coverage at group rates by paying the premiums themselves after leaving the employer or losing the benefit. However, not all plans include this feature, and the costs can be higher than during active employment.
4. Seek Alternative Life Insurance
If the group plan ends and conversion or portability are not viable or cost-effective, employees should consider shopping for individual life insurance on the open market.
Applying for a new policy may require a medical exam and underwriting, which can be a barrier for some individuals depending on their health status.
5. Impact on Beneficiaries
It’s important for employees to communicate with their families about changes in life insurance coverage. If a policy is terminated and not replaced or converted, beneficiaries will not receive any payment should the insured pass away.
6. Legal and HR Recourse
In most cases, employers have the legal right to terminate group life insurance coverage. However, if an employer promises life insurance as a guaranteed or vested benefit (such as in some executive contracts or retirement packages), termination could potentially lead to legal disputes.
Employees should:
- Review the Summary Plan Description (SPD) or policy documents.
- Consult HR for clarification.
- Seek legal advice if the termination seems to violate a contractual agreement.
In summary, if your employer terminates the group life insurance policy, your coverage will end. You may have the option to convert to an individual policy or port your coverage, but these usually come with higher premiums and strict deadlines. It’s crucial to understand your policy’s terms and explore alternative coverage options if you need continued life insurance protection.
If you believe your employer failed to provide proper notification about the termination of the life insurance policy or your conversion/portability rights, you may have grounds for a claim under the Employee Retirement Income Security Act (“ERISA”).
Contact the ERISA attorneys at Johns Law Group for a free consultation.
Jeremiah Johns is a former insurance defense attorney who now represents plaintiffs in bad faith insurance, catastrophic injury cases, and commercial disputes. He has a unique perspective from his experience representing some of the nation’s largest insurance companies.
Jeremiah is licensed to practice law in Texas, Louisiana, Florida, and Georgia (though he is presently inactive in Georgia). He is also admitted to the 5th Circuit Court of Appeals. For his education, Jeremiah earned an LL.M. in Admiralty from Tulane University, a J.D., cum laude, from Syracuse University, and both a B.A. and B.S., magna cum laude, from Georgia State University.
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