Employer's Legal Resource Blog

That’s Life. . . Insurance: The Employer Duty To Notify A Terminated Employee Of The Right To Convert

3.28.2017

Employer provided life insurance as a part of a group plan is a terrific benefit to offer employees.  However, employers must be aware that offering such a benefit also imposes certain responsibilities on them.

Many states have laws that require that employers notify terminated employees of the ability to convert their insurance from that offered under a group plan to an individual plan.  The conversion privilege is especially important to those employees who may have health conditions that make it hard for them to obtain life insurance.  This is because an employee can convert his or her policy without being required to have a medical examination required for most individual life insurance policies.New Jersey’s law provides that an employee is entitled to written notification that he or she has the right to convert his or her policy within thirty-one (31) days after his or her termination.  The written notice must be sent to the employee at least fifteen (15) days prior to the expiration of the thirty-one (31) day period.  An employer can fulfill this requirement in two ways.  The employer can personally give the written notice to the employee or mail it to the last known address of the individual to constitute notice for the purpose of this law. 

What happens if the employer is late in giving notice?   If an employer does not provide at least fifteen (15) days’ notice prior to the expiration date of the thirty-one (31) day period, the employee must be given additional time to convert his or her life insurance.  The additional time must be equivalent to the amount of time necessary to still give the employee fifteen (15) days to convert the policy despite the late notice by the employer.  However, in no event must the additional period extend beyond sixty (60) days after the expiration date of the period provided in the policy.

If the terminated employee should die within the thirty-one (31) day conversion period, his or her beneficiary is entitled to the proceeds of the life insurance policy.  This is true even when the terminated employee did not elect to convert the policy during that time.

The employer should be aware that it must either provide for this notification itself or ensure that its life insurance company does so, otherwise the employer may be on the hook for damages.  The issue of notification should be ironed out prior to the issuance of the group life insurance policy, so there is no confusion down the road when an employee is terminated. This may necessitate a sit down with the broker or the insurance company to make sure the notification process is clear.  

Many employers who provide severance to terminated employees include the notice of the right to convert within the severance agreement provided to the employee.  This is an easy way to make sure that notice is always provided to the terminated employee.  An employer may wish to do this regardless of whether the insurer provides a similar notice. 

BLOG DISCLAIMER

The postings on this blog were created for general informational purposes only and do not constitute legal advice or a solicitation to provide legal services.  Although we attempt to ensure that the postings are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.  The information in this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship.  Readers should not act upon this information without seeking professional legal counsel.

This blog may contain links to independent third party websites and services, including social media. We provide these links for your convenience, and you access them at your own risk.  We have no control over and do not monitor the content or policies (including privacy policies) of these third-party websites and have no responsibility for, and no liability with respect to, their content, accuracy, or reliability.  Unless expressly stated, we do not endorse any of the linked websites or any product, service, or publication referenced herein or therein.  We will remove a link to any site from this blog upon request of the linked entity.

We grant permission to readers to link to this blog so long as this blog is not misrepresented. This site is not sponsored or associated with any other site unless so identified.

If you wish for Wilentz, Goldman & Spitzer, P.A., to consider representing you, please obtain contact information from the Contact Us area of this blog or go to the firm’s website at www.wilentz.com.  One of our lawyers will be happy to discuss the possibility of representation with you. However, the authors of Wilentz blogs are licensed only in New Jersey and/or New York and do not wish to represent anyone who viewed this site in a state where the site fails to comply with all laws and ethical rules of that state.

PRIVACY POLICY