Converting Group Life Insurance to Individual: What You Need to Know

Converting Group Life Insurance to Individual: What You Need to Know

Group benefits like life insurance are an excellent way to make an employment opportunity appealing to prospective employees. However, Canadians frequently change employment during the span of their careers. Workers may worry about losing their life insurance coverage if they change jobs or stop working. 

The good news is that converting group life insurance to individual coverage is possible. Unlike other group benefits you would lose if you retire or change jobs, group life insurance comes with conversion privileges that let you stay protected even if you leave your job.

What Is Life Insurance Conversion?

Canadian employers have a legal obligation to provide terminated employees with options to maintain specific aspects of their group benefits, including life insurance. Life insurance conversion means that ex-employees may move their group life insurance coverage to an individual policy with a life insurance company.

Converting group life insurance to individual coverage does not require the policyholder to undergo medical tests, according to the Autorité des marché financiers. However, the government agency requires the policyholder’s age to determine their new premium when converting group life insurance. The age factor could increase or decrease the annual cost of individual coverage after the conversion.

How Group Life Insurance Conversion Works

Employers often subsidize their employees’ group life insurance, reducing the out-of-pocket expenses for workers. Leaving the job could mean losing the coverage, but conversion privileges protect it.

You are responsible for meeting the 31-day deadline for group life insurance conversion. Insurance companies may have other deadlines specific to their policies. Therefore, employers must terminate employees within a reasonable period to allow them enough time to explore their conversion options.

When you switch from a group life insurance plan to an individual policy, you can keep the coverage until your desired age. Your coverage is no longer contingent on employment.

Reasons Employees May Convert Group Life Insurance Policies

Life insurance offers many benefits that provide support for your family or beneficiaries. With the coverage, you could:

  • Pay off debts
  • Replace lost income
  • Afford funeral expenses
  • Provide for your children and dependents

Despite the life insurance benefits, not everyone feels they need coverage. You don’t need life insurance conversion if you do not wish to continue receiving life insurance after losing group benefits. However, you may consider group insurance conversion for the following reasons. 

Keep Coverage If New Employer Offers No Benefits

Sometimes, workers accept positions with companies that do not offer group benefits or do not have similar coverage as their previous employment. Instead of losing all group benefits when changing jobs, employees could convert some benefits to individual policies to maintain full or partial coverage.

Maintain Coverage Through New Job’s Waiting Period

Many jobs that offer group insurance have a waiting period for new hires. Waiting periods usually last for 30 to 60 days, during which employees are not eligible to receive benefits. If the employee is still working and is in good standing with their employer after the waiting period, they may become eligible to receive group benefits. 

Some people don’t want to wait to meet the eligibility requirements for group benefits, especially if they would be without coverage for several months. They can convert their group life insurance to have coverage during the gap between their hiring date and benefit eligibility. When they enroll in a new group benefits plan, they can cancel their individual coverage.

Avoid Medical Interruption in Coverage

People with pre-existing conditions or monthly medical expenses for chronic ailments often choose to convert their group coverage to avoid interruptions in ongoing medical care. When converting group life insurance to individual coverage, you don’t have to provide medical evidence to the life insurance company.

Applying for new individual life insurance would require a medical exam, possibly resulting in coverage denial due to pre-existing conditions.

The Cost to Convert Group Life Insurance Coverage

Though group life insurance conversion allows you to maintain coverage under several circumstances, it does come with additional costs. Converting your group policy into a personal one must be done within 31 days without medical evidence of insurability.

Because the life insurance company cannot assess the risks of covering a person who may have a pre-existing condition, the agency needs to protect itself. It does that by charging people higher premiums to convert group policies. 

If you want life insurance and are healthy and insurable, consider shopping around to buy an individual policy. Getting new coverage outright may be less expensive than converting your group insurance.

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Get Quality Group Life Insurance Through Group Enroll

Converting group life insurance to individual life insurance is an employee’s personal choice. However, employers can ensure that both new and existing workers receive quality group benefits that will improve the lives and well-being of their families.

Group Enroll is an insurance broker that makes it easy to compare quotes from multiple insurance companies. Our knowledgeable representatives can help you find affordable health, dental, disability, and life insurance coverage. Complete our simple online quote form or contact Group Enroll at [email protected].

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