What to do if losing your job means losing life insurance

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The coronavirus pandemic continues to disrupt the U.S. economy as businesses both big and small cut back, close and declare bankruptcy. Consequently, a reported 16.3 million Americans were unemployed in July compared to just over 6 million the previous year, according to the Bureau of Labor Statistics.

In addition to losing their paychecks, many Americans also have lost their workplace benefits like life insurance, which can offer peace of mind in the event of an unexpected death.

If you find yourself without coverage due to unemployment, you may be wondering what your options are. The terms of your current or most recent policy, as well as your health, long-term financial plan and employment status, all play a part in deciding what to do next.

CONSIDER YOUR INSURANCE NEEDS

Start by asking yourself why you want to continue or replace your coverage. In general, life insurance is only necessary if your death would place a financial burden on others.

If you are the high-income earner or sole earner for a young family, you should assess your situation with a financial planner to make sure your family is protected during your unemployment, says Scott Holeman, media relations director at the Insurance Information Institute.

MetLife is offering to reinstate coverage without evidence of insurability if an employee is rehired within six months. Therefore, ask your human resources department about reactivation options if you anticipate returning to the same company and do not need coverage during your absence.

Additionally, if your spouse has a policy and you are concerned about shared dependents, Holeman says you may want to consider increasing their coverage to help offset the loss of your policy.

ACT QUICKLY

If you are newly unemployed and you want to continue (having) life insurance, you should probably jump on that as soon as possible, Holeman says. Insurers typically look favorably on employment as it can indicate whether you can pay your premiums. They may not see you as a risk if you can show that your unemployment was recent and you have strong job prospects.

Another way to show financial strength is through your assets. Holeman explains that insurers may be more inclined to sell you a policy if you can show a consistent history of paying for things like a car loan or mortgage.

For those who are worried that they may be losing a job and are able to pay the premiums on a new policy buying coverage on the open market while still employed may be easier, Holeman says.

TALK TO YOUR HR TEAM

Your former employer likely offers a financial wellness program to help you better understand what benefits you truly need, says Jessica Gillespie, senior vice president and head of distribution at Prudential Group Insurance. HR teams can also explain any pandemic-related allowances, such as coverage extensions for employees who are temporarily laid off, furloughed or working reduced hours.

If you are interested in keeping the same policy, Holeman suggests talking to your HR team to see if you can convert it to an individual policy. You also may have the option to transfer your coverage to a new employer if it carries the same type of policy. Some insurers are extending porting and conversion windows so employees have more time to make the switch.

CONSIDER TEMPORARY SOLUTIONS

Temporary solutions like term life insurance can help bridge the gap between jobs. Ask about policies that are shorter term or a smaller amount of coverage, Holeman suggests. 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

When assessing your insurability on the open market, your employment status is only one piece of the pie. Be aware that insurers may also use your driving history or criminal record, as well as your age and health when evaluating your application.

There have been reports of insurers turning away an increasing number of high-risk applicants, such as those above a certain age or with serious health conditions. If this sounds like you, you may want to consider guaranteed or simplified issue policies, which require little to no information about your health. However, they can be expensive and typically offer lower coverage amounts.

Group life insurance is available outside of the workplace, too. Many associations and affinity groups offer products like life insurance, accident insurance, disability insurance and more that are priced similarly to what you would have paid through your employer, Gillespie says.

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This article was provided to The Associated Press by the personal finance website NerdWallet. Georgia Rose is a writer at NerdWallet. Email: [email protected]