If you are leaving work for a health related reason – for example medical leave for treatment, short or long term disability, or any other medical reason – it may be imperative to find out about whether you can take your life insurance policy with you when you go!
Usually, if you have life insurance through a group policy at work, when you leave employment you have a right to convert that group insurance into an individual policy. This right is guaranteed in the majority of states (see a list of some, but not all, states statutes at the end of this blog post for examples.).
When you purchase a life insurance policy, the insurer generally will require you to answer questions about your current and past health conditions, and maybe submit to some type of medical exam. This is so the insurer can decide how big of a risk you are, whether they even want to give you a policy, and how much they want to charge you in premiums. Their investigation of your health is called medical underwriting.
However, when you convert your policy, you do not have to undergo any medical underwriting. You are guaranteed the right to continue your policy, although it will likely be for a higher premium than you were previously paying.
If you are leaving your job for a health related reason, it may be very difficult for you to obtain life insurance again, because of your medical history. It is very important to find out the costs and process for converting your policy to an individual policy.
Many times people do not know they have this right to convert their policy, and in some states depending on the policy language an insurer may not be required to notify you. A recent case that was denied review by the United States Supreme Court said that if the policy does not require notification of conversion rights, they are not required to tell an employee who is leaving a job about the right to convert their insurance to an individual policy. (See Walker v. Fed. Express Corp., 2012 U.S. App. LEXIS 14468 (6th Cir. Tenn. 2012). To read about the case, go to http://www.bna.com/supreme-court-declines-n17179871733/
The moral of the story is: be proactive and find out the price and procedure for converting your life insurance policy. Be especially sure to find out the time limit to submit any required premiums and paperwork, since most policies have a very short time frame in which to complete the conversion process. Request the paperwork, even if you are unsure whether or not you want to go through with the conversion, so you have everything you need in case you do decide to convert.
(State statutes regarding life insurance conversion from a group policy into an individual policy: Arkansas, Ark. Code Ann. §23-83-122; California, Cal. Ins. Code §10209(b); Delaware, 18 De. Code Ann. Tit. 18 §3125; Georgia, O.C.G.A. §33-27-5; Illinois, 215 Ill. Comp. Stat. Ann. 5/231.1(h); Massachusetts, Mass. Gen. Laws ch. 175 §134A; Minnesota, 61A.09, subd. 1(h); New Jersey, N.J. Stat. Ann. §17B:27-73; New York, N.Y. Ins. Law §4216(d); Pennsylvania, 40 Pa. Cons. Stat. Ann. §532.7; Tennessee, Tenn. Code Ann. §56-7-2305(c).)