When an employee terminates from the Group Plan, it is critical that as a plan administrator you check the contractual age for the conversion privilege.
If the employee is under the contractual age, they will be eligible to convert their Group Life Insurance coverage to an Individual Life Insurance policy without having to provide medical information.
This is a crucial element of the employee benefit plan, for someone leaving due to illness, which may leave them uninsurable.
Application must be made and the first premium paid within 31 days of terminating from the Group Plan to exercise this benefit.
Another important feature to remember is that if a terminated employee dies within this 31 day period, regardless whether they exercised this conversion privilege, it will be assumed that they were going to exercise this privilege and the life insurance benefit will be paid, provided the death does not fall within the exclusion guidelines.
It is good practice to have a waiver signed by the terminating employee if they choose not to exercise this benefit. This removes any liability from the employer that the employee was not aware of this benefit.