Employer life insurance claims after leaving a job

Employer group life insurance generally ends when employment ends, so a death after the last day of coverage is usually not payable. But there are three important exceptions: most group plans give a short window, commonly 31 days, to convert or port the coverage, and many pay the benefit if the employee dies within it; coverage may continue for an employee who left because of disability; and some people had individual or portable coverage in place. Whether a particular claim is payable depends on the plan's certificate of coverage, the exact termination date and the state's law.

If someone you love died shortly after leaving a job, do not assume there is nothing. Ask for the plan documents and file a claim.

When coverage ends

A group policy is a contract between the employer and the insurer, and each employee holds a certificate of coverage. The certificate typically says coverage ends on the earliest of: the date the employee stops working, the last day of the month of termination, the end of the period for which premiums were paid, or the date the group policy ends. The wording varies, so the date that counts may be the last day worked or the end of that month.

For the basics of how these plans work, see employer group life insurance: what it really covers and group life vs individual life insurance.

The conversion and portability window

Most group plans allow a departing employee to buy individual coverage without a health exam, usually within 31 days after the group coverage ends. Two options appear in many plans:

Details and costs are in keeping group life insurance when you leave a job. The deadlines come from the certificate and state law, and they are short.

If the employee died during the window

Many group certificates provide that if the insured dies during the conversion period, the group insurer pays the benefit that could have been converted, whether or not the person applied. Insurers and plan documents describe this as an extended death benefit or a conversion-period benefit. For example, plan summaries from employers commonly say a beneficiary receives the full amount available for conversion if the employee dies during the 31 days. Because this is a plan-by-plan and state-by-state feature, you need the certificate to be sure. Ask for it in writing.

If the person applied for conversion but died before the policy took effect, the outcome depends on the plan and the policy terms; ask the insurer in writing and consider an attorney.

Other situations that can keep coverage alive

• Disability. Many plans have a waiver of premium or extension for employees who become totally disabled before age 60 or 65 and stop working, with proof submitted within a deadline. A death after leaving a job because of illness may still be covered. See waiver of premium.
• Retirement. Some employers continue a reduced amount of life insurance for retirees. Others end it. Check the retiree benefits summary.
• Layoff, strike or leave. Coverage during leave may be extended for a time; a layoff generally triggers the conversion window.
• Federal employees. FEGLI has its own post-separation rules; see Federal Employees' Group Life Insurance (FEGLI): Basic, A, B and C.
• Supplemental and spouse coverage. Supplemental coverage the employee paid for may follow different rules; see supplemental (voluntary) life insurance at work and dependent life insurance through an employer.
• Individual policies. If the person bought an individual policy at any time, it was not tied to the job; look for one, using how to find a lost life insurance policy.

How to file the claim

1. Contact the former employer's HR or benefits office and the insurer shown on the certificate. Ask for the group policy number, the date coverage ended and a copy of the certificate and plan documents. The employer or the insurer should provide them.
2. Ask whether any conversion, portability or extension applied and what the termination date was.
3. Collect documents: certified death certificate, the claim form and proof of the beneficiary's identity. documents you need for a life insurance claim lists others.
4. Return the claimant statement to the insurer, with any employer section completed.
5. Keep records of every call and letter, and send important requests in writing.
6. If the claim is denied, request the denial in writing along with the plan provision it relies on.

Most employer plans are governed by the federal law ERISA. Under the Department of Labor's claims regulation, 29 CFR 2560.503-1, the plan generally must decide a claim within 90 days (one 90-day extension is allowed for special circumstances), give you at least 60 days to appeal a denial, and decide the appeal within 60 days (with one 60-day extension). Miss the appeal deadline and you may lose the right to sue, so see how to appeal a denied life insurance claim. ERISA also makes disputes about who is the beneficiary distinct; see Employer life insurance, ERISA and beneficiary disputes.

Common reasons these claims are denied

• Coverage ended before the date of death and no conversion or extension applied.
• Premiums were not paid for the last period, for example when payroll deductions stopped.
• The employee had not completed the waiting period or missed an enrollment deadline.
• Increases in coverage required evidence of insurability that was not approved, so only the lower amount is payable.
• The beneficiary form on file is out of date.

Some of these are fixable. Sometimes the employer made a payroll or enrollment error that the insurer can correct, so ask the employer for the records.

Hypothetical example

Say an employee leaves a job on March 31. The plan says coverage ends on the last day of the month and allows 31 days to convert. The employee dies on April 12 without applying. If the certificate pays the converted benefit during the window, the beneficiary may be paid the amount available for conversion. If it does not, no group benefit is owed. The certificate decides, which is why you should ask for it.

Key takeaways

• Group life usually ends with employment, but a short conversion window of about 31 days often applies.
• Many plans pay a death benefit if the employee dies during the conversion window; check the certificate.
• Disability extensions and retiree benefits can keep coverage going after the job ends.
• Ask the employer and insurer for the certificate and termination date in writing.
• ERISA sets claim and appeal deadlines for most employer plans; do not miss the 60-day appeal period.