Continuing Life/Disability Coverage While on Approved Leave of Absence

Does your group term life or disability policy allow employees to continue their coverage while on an approved leave of absence? If yes, it’s important that your leave administration procedures match your insurance policy. This can help you to avoid an unintended claim denial, grievance, or litigation.

Here are some best practices that you should keep in mind:

1. Offer the Extension of Coverage (if applicable)
   1. If your policy includes this provision, you must offer your employees the opportunity to continue coverage while on paid or unpaid leave. During this time, you may collect premium from them or continue paying premium on their behalf.
   2. You must treat all employees under the same classification equally. Allowing one employee to continue coverage while on leave and denying another may leave you or the carrier open to undue liability.
   3. For plans where employees contribute to any portion of the premium, and if the employee declines to pay premiums to keep coverage in force during their leave, they could be required to submit satisfactory Evidence of Insurability upon returning from their leave before being added back on the policy. 

2. Document the Leave of Absence in Writing
   1. When an employee is going on leave, it’s important to have written documentation. Make sure to include the beginning date of the leave, which insurance benefits are being extended, the amount of covered salary (if disability insurance), and when coverage will end (either your agreed upon leave end date or the maximum period allowable by the policy, whichever is earlier). The documentation can be as formal as Board meeting minutes or as informal as an e-mail from the Superintendent, HR or Business Manager, however it should be date and time stamped and in written form.
   2. Many policies specifically state that the leave must be documented and may be required at the point of claim. Others simply refer to “approved” leaves; having this information in writing takes out the guesswork as to whether the employee was on an approved leave.
   3. Having documentation on the leave will support your intent around extending coverage at the time that leave was being taken and avoids adverse risk for the carriers (only covering those that have a higher potential of a claim).

Note that this information is specific to approved leaves of absence, meaning the school, city, or county has allowed an individual to take time off work without losing their position. Employees not Actively at Work and not covered under any continuation provision within the policy will lose coverage, despite employment status. Payment of premium alone does not ensure that coverage remains in force.

If you have any questions about this information or the specifics of your group term life or long-term disability plan, please contact your agent or NIS Representative at 800.627.3660.