How Job Loss Affects Your Disability and Life Insurance Coverage

How Job Loss Affects Your Disability and Life Insurance Coverage

If you lost your job in 2020, you’re not alone. Unemployment is reaching levels unseen since the Great Depression across the country, with about 30 million workers currently seeking unemployment benefits.When addressing the immediate financial emergencies that come with losing your job, it can be easy to forget the big picture. Unfortunately, even when a job loss is temporary, you may lose your disability insurance and some other important benefits.

While you can retain your employer health insurance for up to three years under a federal program called COBRA, you’ll have to pay the entire cost yourself. Other benefits aren’t protected under the program. This means you could lose your life insurance and disability insurance while you’re unemployed.

Even if you aren’t among the millions of Americans currently uninsured, it’s a good idea to have a firm understanding of how layoffs and furloughs affect your insurance coverage. Obtaining life and disability insurance through your employer is often less expensive than purchasing an independent policy, and many employees depend on that coverage. Making preparations to continue your coverage can help you navigate the uncertainties of unemployment.

Furloughs, Layoffs, and Terminations Can Have Different Effects on Your Insurance

In uncertain times, many people are figuring out there are a variety of terms that fall under the vast umbrella of unemployment. While the words are often used interchangeably, they mean different things. They can also have different impacts on your insurance coverage. To get a better understanding of the impact of job loss on your insurance coverage, it helps to understand the difference between termination, layoff, and furlough.


A furlough is a temporary mandatory leave of absence initiated by your employer. Furloughs are often a result of a slow economy or limited funds to pay employees to work full time. Typically, employees are expected to return to their original position and salary after a designated time period. If you’ve been furloughed, you’re still considered an employee of the company and may be able to retain some benefits during furlough.

The purpose of a furlough is to allow a business to stay afloat through difficult times without the strain of paying employees. The expectation is that employees will return to work. Some life and disability plans have provisions to allow continued coverage during a furlough. Even if the insurance plan doesn’t automatically take care of furloughed employees, your employer may work with the provider so coverage can continue.


A layoff is generally a separation from employment due to lack of work. While you may be called back to work when/if the situation changes, there are no guarantees. Employees who are laid off are no longer employees of a business. If your employer is confident about the potential to recall workers in the future, they may offer continued benefits for a specific period of time.

Without specific intervention from your employer, life and disability insurance is unlikely to continue when you’re laid off. Still, many group plans allow laid-off employees to convert disability or life insurance plans to an individual plan. In this situation, you would be required to pay the full price for the policy.


A termination occurs when an employee is separated from employment and won’t have the opportunity to return to the company. This often occurs with a reduction of force due to lack of work. When positions are permanently eliminated, employees will likely have fewer opportunities to continue any type of benefits.

After termination, you can still retain your employer health insurance plan, though you might be interested in searching for cheaper coverage. You may also have the opportunity to convert your disability and life insurance to an individual plan.

Converting Your Disability Insurance Policy

COVID-19 has created a different landscape for everyone, and employers understand that. While your employer may not be able to afford to keep all employees on the payroll, they might seek ways to relieve additional financial stress to employees. The opportunity to convert your disability is not something that should be overlooked.

When you lose your job, you generally have an opportunity to seek alternative health and life insurance coverage through an insurance provider. Since disability insurance is designed to provide coverage for missed work time, getting new coverage can be difficult. You can’t purchase disability insurance unless you’re currently working at least 30 hours a week. Since you won’t be able to obtain disability coverage while you’re unemployed, you should convert your policy if your employer offers the opportunity.

Options for Your Life Insurance Policy

Since you can purchase life insurance regardless of your employment status, you have a chance to consider the most affordable option. If you can convert your life insurance policy, you’ll want to take the time to examine your coverage, the cost, and if you should make changes. Your employer likely pays for a portion of your insurance coverage, and you might not have the full extent of the coverage you need. If you can convert your life insurance to an individual plan, you may also wish to see if you can purchase additional coverage.

Just because you can convert your life insurance to an individual plan doesn’t necessarily mean you should. Comparing various insurance providers and policies can lead to the potential for better coverage or a more affordable plan. If you have difficulty comparing life insurance plans or deciding how much coverage you need, you may choose to seek advice from an independent insurance agent.

Customized Advice from Professional Agents at Healthcare Solutions Team

Obtaining insurance through your employer generally streamlines the process, leaving you with little research to take care of and few decisions to make. Finding the coverage you need on your own can be confusing. Whether job loss is temporary or permanent, saving money is a priority. Still, you don’t want to skimp on coverage, especially during uncertain times.

While many Americans were living week to week before the pandemic, a full-time job provided a sense of security. As weeks of increased unemployment rates have stretched into months, workers in every industry face potential changes. Although unemployment claims peaked in April, there is concern about the effects of COVID-19 outbreaks as states slowly reopen. Changing school schedules add to the confusion as working parents try to balance childcare and stay employed. In many cases, employees returning to work are going back to fewer hours, lower pay, and uncertainty about the future.

Businesses aren’t exempt from the changes brought about by COVID-19. Companies in every industry are working to provide accommodations for social distancing requirements. Many establishments remain closed or operating on a limited schedule for the foreseeable future. While the CARES act passed in March 2020 provided a moment of reprieve, the benefits are quickly running out. Even the potential for a follow-up economic stimulus bill is plagued with indecision. Additionally, many businesses have taken on extra expenses to put safety measures in place or invest in technology for remote workers.

As both employees and businesses hope for a speedy improvement in the future, taking care of the present is becoming more difficult than ever. For employers struggling to hold onto valued employees and workers wishing to return to the workforce, customized insurance options will be a key to remaining insured. Independent insurance agents can help both businesses and individuals find the solutions they need.

HST Provides Insurance Options for Individuals and Businesses

Healthcare Solutions Team (HST) combines a wealth of knowledge about insurance plans with a personal touch that allows both individuals and companies find the coverage they need at prices they can afford. With over 2,500 agents nationwide who work with a variety of insurance providers, you can count on options that will provide the benefits you need to take care of your family or employees during this changing time.

If you’re facing extended unemployment or even a reduction in hours due to the pandemic, your insurance benefits are likely to be affected. Finding a solution can be confusing and time-consuming. Instead of spending your time researching insurance providers and trying to compare policies, talking to an independent insurance agent can help. Instead of providing you with automated offers, HST agents provide you with a one-on-one relationship. Our agents actually take the time to listen to your unique situation and offer advice about your insurance options. We can help you find new insurance policies or convert your existing policy so you can continue coverage while seeking new employment.

HST also has insurance solutions for businesses struggling to take care of their employees. We understand how valuable your employees are to you and your business, and we want to help you take care of your workers. Our group plans are designed to be customizable so you can provide the benefits your employees need. Our agents can help you find a group plan to fit your unique business with affordable costs that remain stable even during unstable times.

If the COVID-19 pandemic has affected your insurance coverage or the coverage of your employees, get in touch with the insurance agency that still retains a personal touch. Healthcare Solutions Team has a variety of solutions to any insurance issue, and our agents are standing by to answer your questions, or provide a quote.

Healthcare Solutions Team is a wholly owned subsidiary of the National General Insurance Group and the Allstate Insurance Company.