Converting group life insurance

When you work for an employer, it is common to have a benefit plan that includes, drug, dental and insurance coverage. When you leave, terminate or retire from that employer, you will usually lose your benefit plan. Some benefit plans, however, allow for conversion privileges and one of the most common examples of this is converting group life insurance coverage into a personal plan.

Should you convert your group life insurance policy?

Before you go too far in converting your group life insurance coverage, it is very important to ask yourself if you need life insurance in the first place. If the answer is ‘no’ then you probably don;t need to consider conversion of the group life insurance. Many people man not need life insurance because they have no dependents, no debt, significant savings or maybe more than enough existing life insurance coverage from other policies.

How much will it cost?

If you do need life insurance, then it’s important to understand the costs of converting the group life insurance policy into a personal one. When you convert group life insurance to a personal policy, one of the biggest benefits is the ability to do so within 31 days with no medical evidence of insurability. This is really great for people who need life insurance but cannot get it because of age, smoking or medical issues. Since there is no medical required for the conversion, the life insurance company protects themselves by charging a higher premium for converting group policies.

If you are healthy, insurable and need life insurance, it may be in your best interest to shop around and buy a personal plan because it will be less expensive for those that are more insurable.

Time goes quick

Remember that when you quit or retire, you only have 31 days to convert that life insurance policy and those 31 days will fly by because you will have so many other decisions to make.

If it’s feasible, it’s always ideal to plan your life insurance needs farther in advance. It may be better to apply for a personal life insurance policy before you retire or quit. Going through the medical will help you understand whether you are uninsurable, healthy, have a rated policy or potentially have exclusions. Giving yourself time and planning ahead will help you to make better, more rational decisions.

Getting help

If you need help understanding the merits of converting a group life insurance policy, look for a financial advisor or life insurance agent that understands insurance conversions. Typically you may want to look for the professional designations like CLU (Chartered Life Underwriter) or ChFC (Chartered Financial Consultant). Both the designations are specific to the life insurance industry and represents a higher level of long term commitment, professionalism and knowledge.

It’s also important to look for a life insurance broker instead of a captive life insurance agent. Insurance brokers will shop the market for the best products and the best price. Brokers are more likely to act in your best interest that an agent that just sells one companies products.



    Just a point of clarification. If you’re converting your group insurance to an individual policy in the 31 days noted in the article, there’s not a lot of thinking involved. Your broker simply contacts the insurance company that holds your group insurance coverage. The insurance company will provide your predefined available options – likely one or two gruesome choices of insurance. Take your pick – that’s what’s available if you are going to ‘convert’. Where a broker is going to come in handy is if you’re looking at options for an individual policy from other companies rather than ‘converting’ your group coverage. Shopping more companies is one of the most beneficial things consumers can do when purchasing life insurance.

    The only reasons I see for actually ‘converting’ group life insurance are because you need to bridge the gap between group coverage and getting an individual policy in place, or if you’re uninsurable so the choices available on conversion are the only options you have. If either of those are you, then the 31 days noted in the article are vital. Nobody will tell you that you have only 31 days – it’ll simply pass and you lose the option to convert.

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