Losing Employee Life Insurance Due to Job Loss: What’s Next?


As the U.S. economy continues to be disrupted by the coronavirus pandemic, businesses large and small have had to close down, declare bankruptcy or cut back on their operations. According to the Bureau of Labor Statistics, 16.3 million Americans were without work in July, compared to just under 6 million in the previous year.

Many Americans have lost their paychecks and their life insurance. This can provide peace of mind in case of unexpected death.

You may wonder what your options are if you’re without insurance because of unemployment. Your current or most recent policy terms, your long-term financial plan, and your employment status all have an impact on what you do next.

Take into account your insurance requirements

Begin by asking yourself why your current coverage is being discontinued or extended. Life insurance is generally only required if you are financially burdened by your death.

Scott Holeman from the Insurance Information Institute, media relations director, suggests that you assess your situation and consult a financial planner if you are the sole or high-income earner of a young family. This will ensure that your family is covered during unemployment.

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MetLife will reinstate coverage if an employee is hired again within six months. If you are returning to the same company in six months, contact your Human Resources department for reactivation options.

Holeman suggests that you consider expanding your spouse’s coverage if you are worried about your dependents.

Act quickly

Holeman states, “If you’re newly unemployed and want to continue having life insurance, then you should definitely jump on it as soon as you can.” Employer approval is usually a good thing, as it could indicate your ability to pay your premiums. If you can prove that you are not at risk and that you have good job prospects, they may not consider you to be a risk.

Your assets are another way to demonstrate financial strength. Holeman explained that insurance companies may be more likely to sell you a policy when you have a track record of paying your mortgage or car loan payments.

Holeman suggests that if you are concerned about losing your job, and can afford the premiums for a new policy, it may be possible to buy coverage on the open marketplace while you are still employed.

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Talk to your HR department

Jessica Gillespie is senior vice president and head distribution at Prudential Group insurance. She says that your former employer may offer a financial wellness program to help employees better understand their benefits. The HR team can explain any pandemic-related allowances to employees, such as coverage extensions for employees temporarily laid off, furloughed, or working reduced hours.

Holeman recommends talking to your HR team if you want to keep the same policy. If your policy is the same, you may be able to transfer your coverage to another employer. Insurers are giving employees more time to switch, and some insurers have extended conversion and porting windows.

Temporary solutions are an option

Temporary solutions like term life insurance can help bridge the gap between jobs. Holeman suggests that you inquire about policies with shorter terms or less coverage. “You might also want to look at something like accidental life insurance, or final expense insurance that would pay for a funeral.”

Evaluate your insurability

Your employment status is just one part of the equation when determining your open market insurability. When evaluating your application, insurers might also consider your driving record or criminal history.

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Insurers are turning down an increasing number high-risk applicants. This includes those over a certain age and those with severe health conditions. You might be interested in guaranteed or simplified-issue policies. These policies do not require any information about your health. They can be costly and offer lower coverage.

Group life insurance is available outside of the workplace, too. Gillespie states that many associations and affinity groups offer products such as life insurance, disability insurance, and other insurance at a similar price to what you would pay through your employer.