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Summary

If you have life insurance through a group such as an employer, and you are leaving the group or the group is being cancelled, you generally have a right to keep your insurance by converting it to an individual policy without providing any medical information. It doesn't matter why you're leaving the group.

It is generally a good idea to convert your coverage rather than lose it -- but each circumstance needs to be considered on its own.

How much you can convert depends on the circumstances.

If you decide to convert, follow the rules precisely. The practical aspects of how to convert a life insurance policy are different if you have a VGLI, FEGLI or SGLI policy.

If your policy does not include a right to convert, call your state Insurance Department offsite link to determine whether the law of the state you live in requires a right of conversion. If it does, you'll have the right even if it's not mentioned in your policy.

Note: If you have group universal life insurance, there is no need to convert. Group universal life insurance is almost always issued as individual coverage to each eligible member of the group. The premium and insurance terms stay the same.

For information, please see:

What Is The Right To Convert?

If any portion of your group life insurance ends or is cancelled, you will almost always be offered an opportunity to replace some or all of the insurance with an individual policy issued by the same insurance company (the right to "convert" to an individual policy.) You do not have to prove you are healthy in order to convert your group insurance because no health questions will be asked.

Typically the policy to which you will have a right to convert will be a whole life policy, rather than a less expensive term policy.

In some states, you must be offered a term policy for the first year, after which the policy becomes whole life. The advantage to you in this scenario is that your premiums for the first year will be lower.

Note: if your employer contributed to the cost of your coverage, your premiums could increase once you leave your employer. If this is a burden, you can decrease the amount of the insurance which will lower your premium. If an annual premium is difficult for you to pay, ask whether you can make a monthly or quarterly premium payment.

How Much Can I Convert?

The usual life insurance policy issued to groups is Group Term Life Insurance. Generally, there is a to convert your coverage to an individual policy in three different scenarios. The amount of coverage that can be converted will vary depending on the event that "triggers" your right to convert.

If you leave the employer or group

If you leave your employer or other group through which you have group life insurance coverage, your eligibility for group insurance will end. In most circumstances, this triggers a right to convert the full amount of your insurance to an individual policy.

A change in status

For example, if you have life insurance coverage through an employer as a full time employee and you change your status to part time, you may no longer be eligible for coverage at all, or you may not be eligible for the same amount of coverage. In this scenario, you generally can convert the amount of coverage that you would lose as a result of this change in status.

Cancellation of the group policy

The third scenario which may trigger a right to convert to individual insurance is when the group that issues the insurance cancels the entire group policy. In this scenario, the amount that you can convert is often "capped". For example if you have $100,000 in group coverage and the entire group policy is cancelled, you may only be able to convert $10,000. The reason for this is that it is generally assumed that when a group policy is cancelled, it is being replaced by insurance with another carrier.

How To Determine Your Conversion Rights

To determine what your conversion rights are:

Pull out a copy (or if you don’t have one, obtain a copy) of your certificate of coverage or a summary plan description.

These are both documents to which you are legally entitled and which should have been supplied to you as a result of your participation in the life insurance program.

If you do not have either of these documents, you may request them from the group (for example, your employer, union, bank or association), the policy administrator, or the insurance company.

If it appears that you may have difficulty obtaining this information, we recommend that you put your request in writing and keep copies of all requests for information.

Look for the appropriate provision in your policy for your situation:

Eligibility: The provisions detailing the eligibility for coverage for various classes of employees (full-time vs. part-time, for example) will specify which group members are entitled to which levels of coverage. These provisions should also indicate what happens in the event that you change from one class to another.

Conversion: The conversion provision generally details what your rights are in the event that you leave the group and thus are no longer eligible for the group coverage.

Cancellation of the Policy: This provision will explain your conversion rights and indicate any cap on the amount that can be converted in the event the entire policy is cancelled.

Should You Convert Your Group Life Insurance?

If you are losing coverage that was obtained through a group, there are a number of factors to consider when deciding whether or not to convert to individual coverage:

  • Is the insurance needed to provide for a partner, spouse, dependent children, other family members or loved ones?
  • Can the individual policy be used as a source of cash now or in the future? See New Uses of Assets – Life Insurance.
  • Will the premium payments be affordable? If maintaining coverage is desirable, but you cannot afford the premiums, there are a number of additional factors to take into account:
    • Would a family member be willing to help with the premium payments?
    • Are there any other sources of help for maintaining the premiums? Former employers? Friends? A local, nonprofit disease specific organization?
    • Would the premiums be affordable if you converted less than the amount of coverage being lost? For example, if you have $100,000 in group coverage, you could convert a smaller amount such as $25,000 or $50,000 which would decrease the premiums but still maintain some amount of coverage.
    • Would the premiums be affordable if you could pay them in installments over the course of the year instead of all at once? (Generally insurance companies will allow periodic payments. They will generally charge a small surcharge for this right.)
    • Would you be able to afford the premium long enough to enable you to get cash from the policy? If not an annual premium, will the insurance company allow a monthly or quarterly payment, and, if so, can you afford that?
    • Will you have another opportunity to replace the coverage? For example, if a loss of coverage is a result of leaving one employer to go with another one, does your new employer offer life insurance for which you would be eligible?

If you decide not to convert your life insurance, give yourself a day or so and then reevaluate your decision to make sure you've considered all factors.

How To Convert Your Life Insurance Coverage

Once you have determined your conversion rights you are ready to move forward with the application for conversion. Take the following steps:

Step 1. Request a conversion application.

A conversion of your group life insurance is not automatic. You must apply for an individual policy to replace the group coverage that you are losing.

To start the conversion process, contact the group (your employer, union, bank or association), or insurance company and request a conversion application. Be sure to make notes about whom you speak when you make your request.

Step 2. Note any application deadline

Your right to convert your group life insurance without medical questions or a medical exam is usually limited to 30 days after the cancellation or termination of your group

coverage. Failure to file your application within the specified time frame will result in a loss of your coverage.

Make a note to send the application well before the deadline so there is time to send another copy if for some reason the insurance company doesn't receive your first attempt.

Step 3. Submit the application with your premium

Complete your conversion application and follow the instructions on the form for submitting it to the appropriate party. In some cases it may need to go to your employer first. Alternately, you may be instructed to send the application directly to the insurance company.

In most cases, you will need to submit your first premium payment along with the application.

Be sure to keep a copy of the application for your records, and keep notes about where you submit it.

Step 4. Follow up

Because your right to convert your coverage is limited to a certain time frame, it is a very good idea to follow up once you have submitted the application to be sure there are no glitches.

  • If the conversion form goes to your employer first: Confirm that the employer received it. Also ask your employer to notify you when the form is sent on to the insurance company. Then follow-up with the insurance company to be sure the form was received.
  • If the conversion form goes to the insurance company: Mail the application in a manner which will provide you with proof of delivery, such as Certified Mail, Return Receipt Requested or via one of the overnight services. In a few days, call the insurance company to confirm receipt of the application. Note the name of the individual that you speak with, and how long the person tells you it will take to process the conversion. Make a note in your calendar to remind you when to make the follow-up call.

What If I Have Federal Employee's Group Life Insurance, Veteran's Group Life Insurance or Servicemen's Group Life Insurance?

Federal Employee's Group Life Insurance (FEGLI), Veteran's Group Life Insurance (VGLI) and Servicemen's Group Life Insurance (SGLI) are insured by a combination of insurance companies rather than just one life insurance company.

If you have FEGLI, VGLI or SGLI you will need to convert your life insurance through a life insurance agent for one of the insurance companies that participate in those particular programs.

  • Bear in mind that agents represent the insurance company -- not you.
  • Agents work on a commission basis. They generally receive less than a standard commission for issuing a conversion policy, and thus some may not exactly "dote" on you. If this is the case, don't hesitate to find another agent.
  • Agents may ask you medical questions. If one does, you can politely indicate that it is your understanding that such information is not required to convert. You do not have to provide medical information to convert group coverage to individual coverage as long as the amount you are converting is equal to or less than the amount of coverage you had under the group policy. There is no reason to provide medical information to an agent or insurance company when it is not necessary.
  • Agents may try to offer you a policy with various "bells and whistles". Generally, however, you best bet when converting is to indicate that you simply want the policy with the lowest premiums. It can't hurt to ask the agent if you can convert to term insurance for the first year since term is cheaper than permanent insurance.

What to Do If You Weren't Given An Opportunity to Convert Coverage

In almost all cases, if you are losing all or part of your group life insurance coverage, the employer, bank, union, association, or the insurance company itself, is required to notify you of your right to convert the coverage.

If you were not notified of your right to convert, or if you were unable to apply for a converted policy within the specified time frame because you were unable to obtain an application for conversion, you should:

  • Contact the insurance company.
  • Explain the situation.
  • Request in writing an extension of your time to convert your life insurance coverage.

If you are unable to fix the situation, consider contacting the insurance department in your state for assistance. For a list of state insurance departments, see: www.naic.org/state_web_map.htm offsite link.