Effects of Layoffs on Life Insurance
Recent research in the US, UK and Japan has shown that downsizing is regarded by management as one of the most effective options to help struggling organisations cut costs and improve flagging companies fortunes. Normally speaking a layoff is a cost cutting measure. Whilst a layoff typically involves a cash payment to the employee there are the intangible costs to the employee that are lost. Such as health care and life insurance. Layoffs and the effect on life insurance should not be underestimated.
Porting or transferring to a new employer
Your employer may offer you the option of porting your company life insurance policy into a policy of your own. It is important to compare prices in comparison to the rates they may offer you in order to ensure the you are getting the best deal. Also take into consideration any health changes that may have occurred.
If you have a new employer you are moving to, they may be bale to take over the policy.
If neither of these options are available the policy will usually lapse, but ensure to check with the human resources department.
Replacement Life Insurance
If there is no porting of your existing employers life insurance policy, you should consider a replacement for the life insurance. Typically with a company plan, there would be life insurance equal to a multiple of your salary,usually 3 or 4 times, up-to a top limit. Look around for a similar value life insurance as the minimum to replace the lost life insurance cover. Remember that this should be a bear minimum that you should consider taking out to cover what has been lost. In order to reduce the cost, look for annual policies as these can reduce the premiums for you.
Some people use the life insurance provided through work as the fail safe insurance for their mortgage protection. If you are subject to a layoff and are in this position it is another reason to look at a replacement policy as soon as possible to ensure there is no break in cover that could occur at the worst possible time.
Keep your protection in place
It is easy to consider that any life insurance that you currently have can be replaced though the use of the work life insurance scheme. However it is worth remembering that any layoff would see that work policy terminated and any new life insurance more expensive to arrange than the original policy that you had in place. You can never have too much life insurance!