Understanding Life Continuation Options – Portability and Conversion

Updated May 13, 2024

Many schools, cities, and counties offer a Conversion and/or Portability feature within their group life insurance plans. This allows employees whose group term life insurance coverage has expired the chance to either "convert" to an individual whole life insurance policy or "port" to another term life insurance policy.

When an employee loses coverage, they have a 31-day window to apply for a new policy. It is essential for employers to promptly inform employees about the details and constraints of their Conversion/Portability choices.

Portability

Employees have the opportunity to switch their group term life insurance policy to a personal term life insurance policy if their plan offers portability.

Portability is available to employees, regardless of their health status, as long as they apply within the specified timeframe (as indicated in the certificate of insurance or policy). Typically, this window is 31 days following the loss of coverage. Portability serves to bridge any insurance gaps, such as during job transitions, and is generally not applicable to disabled employees or retirees.

• Ported coverage usually costs less than converted coverage
• Premiums are often submitted directly to the carrier
• Coverage is provided for a certain “term” (period of time) and expires when the term is up
• No cash value or benefit at the end of the term
• If the employee passes away during the term, the benefit is paid to the beneficiaries

Conversion

Through our Conversion feature, employees have the opportunity to transform their policy into a whole life policy, regardless of their current health status.  Again, they must apply within the specified timeframe.

Unlike term life insurance policies, whole life insurance policies offer a guaranteed cash value that grows over time. Employees can also access loans against this value. In the event that loans are not repaid before the employee's passing, the death benefit payout will be adjusted accordingly. Additionally, the policy includes a cash surrender value, giving employees the option to receive cash if they choose to surrender the policy or continue coverage without additional premium payments.

• Premium payments may be a lot higher than the group rates
• Some policies allow conversion for coverage lost due to age reductions
• Converted coverage can continue with premium payments until the scheduled maturity date (date varies per insurance carrier) at which time the cash surrender value is paid to the employee