Unemployment is an event that happens to many people in their working life. How you prepare for it is important and may determine how easily you get back on track. Experts suggest while you are employed putting aside three to six months of earnings in a savings account or some other form of savings you can liquidate easily.1 Keeping your benefits current is also important. During a period of unemployment, a former employee who is previously covered under an employer’s group coverage under the Consolidated Omnibus Budget Reform Act (COBRA) can continue with group health coverage.
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Many people don’t plan for or think about the status of their life insurance during periods of unemployment.
Life insurance options when unemployed
Three options may follow the loss of a regular paycheck:
- Your life insurance coverage ends, and you are without life insurance coverage.
- Your group life insurance allows you to convert the group life insurance policy to an individual life insurance policy.
- You seek your own individual life insurance policy so you will ensure you have coverage.
Converting a group life insurance policy to an individual life insurance policy
If your life insurance was part of a group life insurance through your former employer, you may be able to convert it to a personal life insurance policy and continue paying your premiums each month. Speak with the human resources or benefit department to see what your options are.
Buying an individual life insurance policy
If you lose your group life insurance policy, it may be a good time to speak with a licensed insurance agent who can steer you in the direction of an individual life insurance policy.
Having an individual life insurance policy is a safe and secure way to ensure you are always covered, no matter your current employment situation. Ensuring you and your family are financially protected from unknown events is a priority even when you are unemployed.
If you do have an individual life insurance policy, you want to continue paying on the premiums each month. Depending on the type of life insurance you have, you may consider using a part of the insurance as a loan during your unemployment to cover your household expenses, if appropriate.
If you are having difficulty paying the life insurance premium, you may be able to reduce it to a smaller, more manageable amount. It is important to contact customer service and the agent who sold you the insurance and make them aware of your current condition. They may have alternate options for you.
Reevaluating life insurance after getting a new job
Once you are employed again, it may be time to evaluate your insurance needs with a licensed insurance agent or broker. You may have a higher income at your new job and evaluating your needs with a licensed insurance agent is a priority. Or you may want to purchase whole life insurance in case you ever have an unexpected event that would allow you to borrow from your insurance policy.
It is likely your employer will offer group insurance, but if you were to lose your job, would you be in the same place with no life insurance because you only depend on the offered group life insurance by an employer?
This is a good time to evaluate what your long-term financial needs are and how investing in an individual life insurance policy may save you in the long run.