How To Manage Life Insurance If You’ve Been Laid Off

Group life insurance offers you inexpensive or free coverage through work, helping to give your loved ones a basic safety net if you pass away. However, there are two potential challenges with this type of policy. First, tax rules prevent many employers from offering more than $50,000 in coverage, according to Forbes.

But perhaps more importantly, you only have group coverage while at your employer. If you get laid off, you can lose that coverage. So, this article will dive into how to get life insurance and manage your coverage in several situations you may pursue after a layoff or leaving work for other reasons.

Becoming Self-Employed

Self-employment can offer more freedom and flexibility. It can also provide additional stability if you’re self-employed on the side while working full-time. But your income might not be as steady if you get laid off. Furthermore, you won’t have access to group coverage like you would as an employee.

This can make it even more important to get self-employed life insurance. This type of life insurance policy can help protect your loved ones if you pass away while self-employed. Additionally, self-employed people have different retirement savings options than employees. They may also have more complex financial needs, especially if they become very successful. 

Thanks to the cash value growth component, permanent life insurance can help them with this. Each premium payment helps grow your cash value tax-deferred over time at a specific rate, depending on the policy type. Once you accumulate enough, you can use it as a source of wealth via borrowing or withdrawing from it. Furthermore, you can receive the cash value minus surrender charges if you give up your policy.

Finding A New Job

If you’re planning on finding a new job, it’s a good idea to consider purchasing a life insurance policy just in case. Employer-provided life insurance may last up to 30 days after you leave, but it’s gone after that. So, if it takes you longer than 30 days to find a job, your loved ones could be at risk if you pass away during that period.

If you already have a policy or don’t need much coverage, you may consider getting a smaller new policy. This can be inexpensive if you only want to match all or just a portion of the old job’s group life insurance coverage.     

In that case, you could get a small whole life policy, like simplified issue life insurance. These policies have short applications and no medical exam, making them quick and convenient options. Plus, they offer lower premiums for that small death benefit and a cash value growth component for wealth-building.

If you don’t have a policy but need a lot of coverage, you might consider a term life insurance policy. These affordable life insurance policies only last for 10 to 30 years, but premiums are typically cheaper than permanent life insurance for the same coverage levels.

Retiring

Retirees may want to purchase an individual life policy to replace their employer coverage once they retire. The coverage level you should get depends on your needs. If you only need enough to cover final expenses, then a final expense policy should work fine. This type of life insurance helps cover funeral expenses, medical bills, and other end-of-life costs. In addition, it offers low premiums, small death benefits, and cash value.

A term life or permanent life policy could work better if you need more coverage to protect your partner or leave more to your heirs. However, you might want to purchase the policy before retiring. In addition, the younger you are, the cheaper your premiums will be.

The Bottom Line

Getting laid off can be stressful, but it’s not the end of the world. Depending on your situation and stage in life, you can try your hand at self-employment, look for a new job, or even retire. But each path may require you to reevaluate your life insurance needs and get new coverage.

Self-employed people need to have their own policies if they want to protect their loved ones since they don’t have access to an employer’s group coverage. If you’re staying in the workforce and looking for a new job, you might consider a small or term life policy to minimize your expenses while holding yourself over until you start the new position.

Finally, if you’re retiring, a range of policies can work. For example, final expense insurance works great if you only need to help loved ones cover end-of-life expenses. Meanwhile, permanent and term life policies may work better if your partner needs more help replacing your income and paying off debts or if you want to leave a larger legacy. Regardless of your situation, shop for multiple quotes. That way, you can get the lowest rates on the coverage you need.

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