Converting 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.

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