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| The Basics | Insurance: Can you take it with you?
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When leaving a job, making the wrong decision about continuing insurance can cost you dearly. Here's how to wade through the plethora of options so you can make a fully informed decision.
By Ginger Applegarth
Congratulations! Youre one of the winners of a strong domestic economy and a national unemployment rate thats near a 30-year low. Youve got a job offer, or you expect to land a new job quickly if you leave the one you have.
In these heady times, its hard to focus on mundane things like insurance. You may even be tempted to put it last on your agenda. There's only one good response to that temptation: Don't!
Chances are you have a number of options about taking the insurance you have with you. The decisions are not to be taken lightly. Make the wrong move, and it could cost you.
Youre probably most aware of your medical insurance, but your employee-benefit package may include other insurance plans, such as life, disability, accidental death, dental and even group long-term care. So, if youre changing jobs or thinking about it, let me offer some guides about what to keep, what to drop and what to look for in the insurance options you may have:
Keeping the doctor covered
Medical insurance. The great news about medical insurance is, if youre now covered under your company's policy, federal law gives you the right to continue that insurance for up to 18 months after your date of termination -- the day you formally separate yourself from your old job. The law is COBRA, an acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985. There are two catches. One -- a big one -- is that you have to pay not just your portion of the premium, but the employers portion as well. The second is that COBRA generally doesnt apply to employers with fewer than 20 employees.
Your company can also tack on a small monthly fee to cover the cost of administration. Your company has to send you a letter within 45 days of your termination date to ask if you want to continue coverage. Say yes -- especially if you don't have another job. Even if you do, there may be a waiting period before youre enrolled in your new employer's plan.
Yes, the premiums are expensive, but you actually have until just over 100 days after the date of termination to pay those premiums.
If your COBRA premium is high, you might apply for an individual policy on your own. If youre in good health, you may find the premium under the COBRA plan is more expensive than an individual policy.
One more thing to consider with medical insurance is any existing medical problem you have. When you change jobs, your new company's medical insurance plan may exclude payment for any pre-existing condition claims for a waiting period of perhaps six months, or even two years. Some plans permanently exclude pre-existing conditions. If you have that issue in your family or yourself, find out what the pre-existing condition policy is before you accept the job.
Other insurance coverage
Dental insurance. Dental insurance is also covered under COBRA; you can continue coverage for up to 18 months after you leave a job. Once again, the catch is that you pay the premium. Most individual dental-insurance plans have very limited benefits, so make sure you compare your premiums to the maximum benefits you could get under the dental policy.
Disability insurance. Until fairly recently, most group disability-insurance plans gave you the option of converting to an individual disability policy. Usually, though, the premiums were high. Now, the ability to take your disability coverage with you is virtually nonexistent. If you can convert to an individual plan, do so! Your next company may have great disability benefits, but what about the job after that? In today's job market, its rare that a worker stays at one company for a long period of time. And it's getting more and more difficult to obtain individual disability insurance. If you can convert your group disability to an individual plan, the benefits will be much more restricted. Your current plan may pay if you are unable to perform the duties of your own occupation but, if you convert that group plan to an individual policy, you will probably get a policy that only pays if you can't perform any job that is reasonably in line with your education and experience.
Accidental death. You probably can't convert accidental death. Besides, this coverage isn't worth the premiums youre paying anyway. To be brutally realistic, if you need more life insurance, you need more life insurance. So buy that instead. The time you really need extra life insurance is if you die from an illness, because of the probable lost income and medical expenses. If you die in an accident, and it's not your fault, your family may be able to receive a financial settlement.
Long-term care insurance. This covers nursing home care and is the most recent addition to many employee benefit packages. You should be able to convert it to an individual policy and take your long-term care policy with you. Your premiums may change, or they may remain the same. If you have long-term care insurance, keep it. This is true if any of your relatives obtained long-term care insurance through your plan, another new offering by many employers. If youre in good health, check around and see if an individual policy is less expensive than the converted one.
For all the insurance you plan to try to continue, take the time before you leave your job to get individual quotes from insurance carriers. You may find cheaper rates elsewhere. Group insurance plans have more people with higher claims, because insurers must accept all of the employees regardless of health (in most cases). If, however, you plan to replace your group benefits with individual policies, go ahead and convert those insurance plans anyway. You want to keep those in force until your new policies are in your hand and the premiums have been paid. That way, youre guaranteed coverage. Too many people assume they don't need to convert their existing plan because they will just get one on their own. So, they leave their jobs, apply for new coverage, and then end up with no coverage because they get turned down.
It may seem as if you have a lot more important things to do than look at your insurance when you are getting ready to leave your job, but that's simply not true. Put that at the very top of your to-do list, and you will know you are making smart decisions even during the turmoil of a job transition.
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