February 2025 Question of the Month

What is life insurance continuation and does it apply to our company?

Conversion and portability are continuation options for employees who are losing their employer-sponsored life insurance coverage due to separation of employment. If your company is sponsoring group life insurance products, then it’s likely continuation options will apply and it’s important to understand your role, as a sponsoring employer, when employees lose their entitlement to coverage.

First, let’s look at some of the general rules to highlight. Typically, portability rates are lower than conversion rates and some notable differences are summarized below. 

Portability

• Keep your group life insurance coverage when you leave your job 

• Usually has better rates and policy terms than conversion 

• Rates may be lower than individual policies, especially if you have a health condition 

• You may need to provide proof of insurability 

• Sometimes portability can be limited to a specific timeframe such as 24 months

Conversion

• Change your group life insurance coverage to an individual policy 

• You may not need to answer medical questions 

• You may be eligible if you're leaving your job, reducing hours, retiring, or your coverage is being reduced or eliminated 

 One commonly overlooked aspect of group benefits administration is informing separating employees of their rights to life insurance continuation when their eligibility changes. Notifying separating employees of their continuation rights is especially critical for employees who may be older or unable to obtain alternative life coverage due to health risk factors. You may also want to consider whether you’re notifying employees experiencing an employment status change that results in the loss of group life coverage.

The election window to apply for continuation is limited—most carriers require elections within one month from losing coverage. The election time periods are generally provided without exception. This increases the importance for employers to notify employees of their continuation rights.

Some life insurance products feature conversion while others feature portability. Some life insurance products will even include both conversion and portability. You can check your insurance certificate for details about conversion and portability. You can also ask your dedicated Capitol Benefits Group team to confirm your company’s policy specifics and for more information on this important compliance issue.