“Great Resignation” 5 Essential Life Insurance Tips (Ultimate Guide)

Quitting Job and Life Insurance Coverage 2023

Brian McHale last updated on March 22, 2024

The “Great Resignation” Life Insurance Guide

Are you thinking about joining the ‘Great Resignation’ and are looking for more information about the life insurance coverage offered through your employer compared to purchasing your own life insurance policy outside of work?

Great! Then you have come to the right place.

In this guide, we’ll show you everything you need to know about group life insurance coverage (basic, voluntary, supplemental) versus having your own individual (private) life insurance policy (term life or whole life) outside of your employer.

Also, we’ll provide some great tips and answer all of your questions about leaving your job to become a part of the “The Great Resignation” and how it affects your life insurance coverage in 2023.

What is “The Great Resignation?”

The “Great Resignation”, also known as the “Big Quit”, is the name being used for the widespread trend of the millions of U.S. workers resigning from their jobs during the COVID-19 pandemic over the past three years.

American workers are quitting their jobs in record numbers for both personal and business reasons. Many are leaving to start their own business, move to a new company and some are stepping away from the workforce altogether while they decide on their next career move.

What are the Reasons Americans are Leaving Their Jobs?

Below are some of the most common reasons the U.S. workforce is quitting their jobs in record numbers:

Many workers experienced working remotely for the first time and want to continue to have that autonomy
Many employees are experiencing burnout due to their work demands and responsibilities
Many in the U.S. workforce want to start their own business and become self-employed
Many workers are unfilled with their jobs and want to invest their time and energy in a different pursuit
Many workers feel unappreciated and do not feel they are being properly compensated for their efforts
Many workers have job insecurity
Many employees are unhappy with their company’s work culture or work environment

5 Essential Life Insurance Tips To Help Guide You Through the “Great Resignation”

Below are five (5) essential tips you must know about life insurance coverage if you plan on leaving your job or have recently quit your job. Truth be told, these tips were prudent even prior the “Great Resignation”, however, knowing them today and their application is more relevant than ever before.

1. The Best Time To Get Life Insurance is While You’re Still Employed

The best time to purchase an individual (private) life insurance policy is before you leave your job. This is because life insurance companies do ask about employment and your annual income on their applications.

Life insurance is meant primarily to replace your future income should you pass away prematurely. Many people are unaware of this, but most life insurance companies use multiple of income tables to determine how much total individual (private) life insurance you can carry. The reason for this is that they do not want someone to be worth more dead then alive. So if you have zero income, it can make it more difficult to secure a traditional life insurance policy.

In fact, most of the instant-decision term life insurance companies make it a prerequisite that you are working to qualify for coverage (excluding homemakers, non-working spouse and some students). If you recently left you employer, there is typically a grace period where many carriers for traditional life insurance will use your income from your previous employer if you plan to return to the workforce in the near future.

Note The best time to purchase life insurance is before you leave your job. Life insurance is meant to replace income, if you don’t have income, it can affect eligibility and coverage amounts.

2. Compare Rates from Several Life Insurance Companies

Before you purchase your own life insurance policy outside of your employer, it’s very important to compare rates from several companies. This is because rates can vary as much as 40% or more for the same exact policy.

Each life insurance company sets their own rates and has their own underwriting guidelines. Just a few pounds on the height and weight chart, medications. family history and even your driving record all can affect which company will offer the best rate.

Note Rates can very as much as 40% or more for the same exact policy from one insurer to another. It’s important to compare rates from several companies.

3. Decide if You Need Term Life or Whole Life Insurance

There are two main types of life insurance coverage, term and permanent life. Term life insurance is the closest type of coverage compared to the group coverage that is offered through work. Term life is also the type of life insurance coverage that is recommend by many of the top financial experts in the country today such as: Dave Ramsey, Suze Orman and Clark Howard.

Term life insurance works by allowing the insured to lock in their rate for specified period of time. Most companies offer: 10-year, 15-year, 20-year and 30-year level (fixed) term length options. Their are even a few life insurance companies that offer a 35-year and 40-year term (depending on your age). Also, you can cancel the policy at anytime without a penalty and there is no waiting period for the policy to pay out.

Whole life insurance as the name implies does last the rest of your life. The downside is the cost. Whole life insurance typically costs about 5x to 15x times more than term life insurance. This is why many of the aforementioned financial advisors recommend to buy term life and invest the difference.

This means taking the monthly savings (often hundreds of dollars or more difference) that you would have spent each month on a whole life policy and use it to max out your 401k, pay off your home faster, invest it in the stock market, place it in a savings or investment account.

Note A term life insurance policy is the most similar to the group coverage offered through work. However, with term life insurance, the rate and coverage amount are fixed for the term you select and the policy is yours regardless of your employer.

4. Decide If You Would Like An Application Process with or without a Medical Exam

When purchasing your own individual life insurance policy outside of work the insurance company does want to evaluate your health, typically with a 30-minute no-cost paramed exam at your home. They do this since they are locking in your rate and coverage for the next 10-30 years, regardless of your employer. Also, the insurance is on the hook for the full policy amount from day one if anything were to happen to you.

For those that do not have the time or simply do not want to complete the paramed exam, the good news is there are many options available today that allow applications the option of a no medical exam application or what is called accelerated underwriting underwriting. This allows the applicant the option to skip the paramed if they qualify.

For those that want to secure their own life insurance policy outside of work quickly and easily, similar to signing up for the extra life insurance through work, there is new instant-approval term life insurance application. For those that qualify, this allows the applicant to purchase a level term life insurance policy entirely online in about 15 minutes and the coverage goes in force the same-day.

Note Most life insurance companies require a 30-minute no-cost paramed exam as part of their underwriting process. However, there are many top life insurance companies today that offer accelerated underwriting where an exam is not necessary.

5. Purchase Your Own Individual Life Insurance Policy Outside of Your Employer

It’s recommend to own an individual life insurance policy outside of work so it is not tied to your employer in case you leave your job for whatever reason.

Most employers offer basic life insurance which typically includes coverage for roughly 1x your annual salary in life insurance. This benefit is usually free or nearly free so you definitely want to take advantage of that. However, the extra life insurance you can purchase through work during open enrollment called supplemental life insurance or voluntary life insurance is often expensive and is only a year-to-year plan. This policy typically does not go with you if you leave your employer and in the cases when it is convertible to private insurance the rate is often extremely expensive since you are leaving the group (your employer) and the insurance company has never verified your health so they are taking on a huge risk.

If you wait to purchase your own individual life insurance policy down the road after you leave your current employer, you will pay a higher premium since you will be older. Also, you run the risk of your health changing, being on new medications, having a different build which will also make the rates much more expensive. You can even become uninsurable if an unforeseen medical issue developed.

Note Most employers offer basic life insurance, usually 1x your annual salary, often capped at $50k. The voluntary life insurance or supplemental life insurance, a.k.a. the extra life insurance is often much more expensive than if you were to purchase the same amount of coverage on your own separate from your employer. Also, supplemental life insurance (voluntary life insurance) is often not portable and when it is, it’s often cost prohibitive take it with you if you leave your employer.

How Much Does Individual Life Insurance Cost?

Cost to purchase your own individual private term life insurance policy outside of work compared to supplemental life insurance/voluntary life insurance (extra life insurance) through employer

The cost to purchase your own term life insurance policy separate from your employer can be very affordable. In fact, the cost of a 10-year level term life insurance compared to supplement life insurance or voluntary life insurance is typically comparable or even much less. The best part is that it is your coverage is not contingent of your employment with any employer.

Sample Individual Term Life Insurance Rates:

A 25-year old male in excellent health at the Preferred Plus health class. A $500k 10-year term policy is: $13 month or $155 a year
A 25-year old male in excellent health at the Preferred Plus health class. A $500k 10-year term policy is: $10 month or $122 a year
A 30-year old male in excellent health at the Preferred Plus health class. A $1-million 10-year term policy is: $19 month or $220 a year
A 30-year old female in excellent health at the Preferred Plus health class. A $1-million 10-year term policy is: $16 month or $190 a year
A 35-year old male in good health at the Standard Plus health class. A $500k 10-year term policy is: $23 month or $275 a year
A 35-year old female in good health at the Standard Plus health class. A $500k 10-year term policy is: $20 month or $235 a year
A 40-year old male in average health at the Standard health class. A $750k 10-year term policy is: $50 month or $577 a year
A 40-year old female in average health at the Standard health class. A $750k 10-year term policy is: $43 month or $486 a year
A 45-year old male in great health at the Preferred health class. A $1.5 million 10-year term policy is: $85 month or $975 a year
A 45-year old female in great health at the Preferred health class. A $1.5 million 10-year term policy is: $70 month or $810 a year
A 50-year old male in excellent health at the Preferred Plus health class. A $250k 10-year term policy is: $24 month or $282 a year
A 50-year old female in excellent health at the Preferred Plus health class. A $250k 10-year term policy is: $21 month or $242 a year

_{*Date of birth used 2/10.} _{Rates are for a non-smoker. Some rates include with an exam and others without a medical exam. Rates current as of 2/15/2023}

For more information on the rates for your own life insurance policy take a look at our article:

Average cost of term life insurance: rates by age, term and coverage amount

Pro Tip: When comparing the cost (premiums) of individual term life insurance to the group voluntary life insurance/supplemental life insurance coverage through work, use the rates for a 10-year level term policy. This is the closest term available to the voluntary life insurance/supplemental life insurance offered through your employer which is a basically a 1-year term policy.

The group life insurance offered through work is annual renewable, meaning the rates and coverage are not fixed and can change every year during open enrollment, or be dropped altogether by the employer. With a 10-year level term policy outside of work, the rate is locked in for 10-years. This is more of an apples to apples comparison, even though the term policy has a fixed rate for 10-years whereas the group policy is only a year-to-year plan.

Although you many end up choosing a longer term of: 15-year, 20-year or 30-year term to protect your family based on your needs and goals, for comparison purposes of group life insurance coverage to an an individual policy, you want to use the 10-year term as this is more of an equal cost comparison.

Which Life Insurance Companies Are Highly Rated?

When it comes to choosing a life insurance policy outside the group coverage through work, a good rule of thumb is to choose a life insurance company that has an "A" Excellent financial rating or better from A.M. Best

When it comes to life insurance, a good rule of thumb is to choose a life insurance company that has an “A” Excellent financial rating or better from A.M. Best. If you do this, you can have peace of mind the insurance company is financially strong and we be able to pay out any future claims.

For more information on life insurance ratings and a complete company rating list, take a look at our article:

Life Insurance Company Ratings 2023

Bottom Line

Americans are leaving their jobs in record numbers, dubbed the “Great Resignation” and many have questions about what happens to their workplace benefits including their life insurance coverage. As noted above, the best time to purchase life insurance before you leave your employer since life insurance companies do ask about your occupation, employer and annual income. However, if you recently left you employer, many life insurance companies will offer a grace period and use your annual income from the previous year in determining eligibility.

For most people, securing a level term life insurance policy outside of work is a much better option than getting the extra life insurance through work called supplemental life insurance or voluntary life insurance. Not only does it typically cost less using an apples to apples comparison, by purchasing your own coverage outside of work, you are locking in a policy so that if you leave your job it will not affect your life insurance coverage and your family is still protected.

FAQ

What happens to my life insurance if I leave my job?

The life insurance goes away. Sometimes the supplemental life insurance or voluntary life insurance is portable but the cost is typically so expensive that most people don’t take it with them unless they are uninsurable if they were to apply for their own policy on the open market.

Should I get voluntary life insurance?

Securing your own individual life insurance policy outside of work is a much better option for most people. For those that are uninsurable due to health or lifestyle underwriting concerns, then the supplemental life insurance is a good option. For most people, a private individual life insurance policy separate from work is the better option.

Should I get life insurance through work or private?

Always take the free or nearly free basic life insurance that is usually 1x your annual salary, often capped at $50,000. There is no downside! As for the the extra life insurance offered through work, called voluntary life insurance or supplemental life insurance it’s almost always better to purchase you own policy outside of your employer. That way if you change jobs it won’t affect your life insurance. Also, the rates are often the same or much less expensive, and their fixed!

Can I convert employer life insurance to personal?

It depends on the plan. Sometimes the supplemental life insurance or voluntary life insurance is portable but the cost is typically so expensive that most people don’t take it with them unless they are uninsurable if they were to apply for their own individual policy on the open market.

What happens to life insurance when you change jobs?

The group life insurance offered through your job goes away if you leave. If you have your own individual (private) policy outside of work then it doesn’t affect it.

Why is it important to have life insurance outside of work?

If you leave your current job for whatever reason, your life insurance coverage goes away. Sometimes, the group supplemental/voluntary coverage gives you the option to covert it to personal life insurance but the cost is extremely expensive so most people don’t. To secure a new individual policy down the road will cost you more since you will be older. Also, if your health changes, are on new medications, weight changes, etc. the rate will be even more expensive and can even run the risk of becoming uninsurable should a major medical issue develop.

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