What Is Insurance Portability?
Here’s what happens to your life insurance when you leave a job
Insurance portability lets you take your life insurance coverage with you when you leave a job or your employer stops offering life insurance as a benefit. It allows you to avoid any gaps in life insurance coverage that might otherwise result, but it may not be a permanent solution.
Learn what life insurance portability is, when it’s available to you, how it works, and if there are better alternatives.
Definition and Examples of Insurance Portability
Life insurance portability allows you to continue coverage after your employer-provided coverage ends, such as when you leave a job. You’ll generally get a term life insurance policy without the need for a health exam or a health questionnaire, and you’ll pay the premiums yourself. The rate you get when you port will be based on your current age, and your coverage may be designed to renew every five years, for example. Each time you renew coverage, your premium will increase, so prepare yourself for rising costs.
Portability is a strategy for keeping life insurance coverage when you face a change in your existing group benefits. If you have health issues that make it hard to get life insurance, you might even use it to maintain long-term insurance coverage. Your employer might also give you the option to convert your group coverage into permanent insurance, which is not the same thing as porting it.
If you’re in excellent health, consider applying for a new policy, or at least look into alternatives. Your premiums will rise over time if you port your policy, but you can lock in a rate for a set number of years if you apply for a new one.
How Does Insurance Portability Work?
When your workplace benefits change, life insurance portability enables you to keep life insurance protection in place. For example, you might face a change in benefits if you leave your job, your spouse loses coverage, you get divorced, or your employer reduces benefits. These are known as “triggering events.” If you port your coverage, you’ll generally get a renewable term insurance policy that will continue as long as you pay premiums or until you reach a maximum age set by the insurer. You can pay premiums annually or more frequently, depending on the options available from your insurer.
How to Port a Policy
If you want your existing coverage to continue, you must apply and pay your first premium shortly after leaving your job (or another triggering event). You might need to complete the process within 30 to 60 days, but check with your insurance provider for details.
Portability is an optional feature that isn’t always available; it depends on several factors, including your employer’s choices, insurance company rules, and state laws. If keeping insurance coverage is important as you navigate life changes, verify which options are available before making any decisions.
With a ported policy, you pay premiums directly to the insurance company instead of relying on payroll deductions. If your employer was paying for some or all of your coverage, that benefit goes away when you stop working, and you’ll be responsible for 100% of the cost. The amount you pay depends on your age, and the premiums will increase over time. At some point (often between ages 65 and 80), your coverage will end or the death benefit will be reduced.
Unlike many term life insurance policies that charge the same premium each year, a ported insurance policy has premiums that rise as you age.
Amount of Insurance
When you take your coverage with you, you typically keep the same death benefit—up to insurance company limits. For example, if you have a $300,000 death benefit, you could port that amount, assuming it’s below the insurer’s limit. You generally cannot add to your death benefit with a ported policy, but you can buy additional insurance as a separate policy.
Portability vs. Convertibility
With both portability and convertibility, you maintain life insurance coverage after your employee benefits change. There are several similarities between portability and conversion, but the main difference is that when you convert coverage, you get a permanent life insurance policy with a level premium. Porting your coverage typically provides temporary life insurance that increases in cost each year. Here’s a quick breakdown:
|Type of insurance||Term||Permanent|
|Coverage continues after leaving your job||Yes||Yes|
|Premiums||Increase||Stay level, but will be higher than what you paid as an employee|
|When to apply||Within a limited time after your benefits end||Within a limited time after your benefits end|
It may be possible to combine portability and conversion. Depending on your insurer’s rules, you might be able to port your policy when you change jobs and then convert the term policy to a permanent policy later.
- Portability enables you to continue coverage if you apply within a limited time after your benefits change.
- Ported policies generally do not require medical exams or questionnaires.
- Premiums increase as you age, and coverage eventually ends.
- Other options, like buying a policy directly from an insurer or converting your coverage, are also worth a look.