Understanding Severance Packages, Part 4: Insurance
Whether it comes after a year, a decade or a whole career, being dismissed from your job is never easy. Routines are upended, relationships are disrupted, and your sense of identity may take a hit. Your next step could be a job in the same field, a new career path, an entrepreneurial project or perhaps even retirement. But while you think it over, you’ll also have some important financial issues to consider.
Welcome to the fourth article in a five-part series about severance-related issues that you should know about if you ever find yourself in this challenging position. Today, we look at the potential impact on insurance coverage when leaving your company.
Focus on maintaining coverage
Insurance planning is a vital component of a comprehensive and well-designed financial plan. It’s important to consult with an expert in the field to devise an insurance program that best suits your specific needs and objectives. Since it’s quite common for employees to have much of their life, disability and health insurance coverage through their company group plans, we believe you should understand what your departure from the company could mean for your insurance coverage.
Regarding health insurance, determine whether you’re eligible for a company retiree health plan. Also, evaluate the merits of electing COBRA for a period of time following your separation date—until you find another job or become eligible for an alternative medical plan (such as Medicare or an individual plan). If you elect COBRA, you and your qualified dependents will have the option of continued health benefits coverage in the event that you lose your job. Remember that once your employer-sponsored benefits end, you’ll generally have 60 days to enroll in COBRA.1
Having adequate insurance helps you stay prepared in case you or any of your eligible family members encounter unexpected healthcare needs. We understand that health insurance can be a sensitive and stressful topic, so we’re committed to supporting you and ensuring you have the optimal strategy in place in order to avoid any major gaps in your healthcare coverage.
Insurance strategies to consider
For life insurance, evaluate how much coverage you should maintain and for how long. Also compare the cost to convert your group coverage to an individual policy versus getting a new policy elsewhere. Typically, you may convert your group policy to an individual policy with no evidence of insurability required, which may be an advantage. However, also bear in mind that group life insurance policies are often more expensive than private policies as you get older, so it may be worthwhile to shop around for a private policy.
When it comes to disability insurance, your coverage often ends on your workplace separation date. Individual private coverage can be expensive and difficult to qualify for, so if you plan to keep working, you may want to be mindful of the group disability coverage offered by a future employer.
If you hold funds in the company’s Health Savings Account (HSA), your account can stay there. Don’t worry; you won’t forfeit these funds when you leave the company. Please note that if you haven’t made your full annual contribution to the HSA via payroll deductions by your separation date, you’re still permitted to make any remaining contributions from your personal funds. You can claim a tax deduction for these HSA contributions on your tax return as late as April 15 of the following year after separation.
We’re here to help
Over the years, our team has helped many executives and professionals navigate the complicated and often overwhelming severance process. We’ll develop a personalized strategy, including investment recommendations, to help you make the most of your severance package and position your finances for long-term success.
Leaving your company could impact or even negate your insurance coverage. Contact a Corient Wealth Advisor today to learn more and to see if you’ll still have the required coverage.
Other topics in this series
- Part 1: Severance and deferred compensation
- Part 2: 401(k)
- Part 3: Stock awards and your investment portfolio
- Part 5: Pension plans
ABOUT THE AUTHOR
Lisa is a Partner, Wealth Advisor in our Atlanta office. She joined legacy firm Brightworth in 2005 and became a Partner in 2010. In addition to working with clients, Lisa has published three books: Girl Talk, Money Talk. The Smart Girl’s Guide to Money After College; Girl Talk, Money Talk II. Financially Fit and Fabulous in Your 40s and 50s; and legacy firm Brightworth’s first book, Building Your Wealth Inside Corporate America. Lisa has been featured in The New York Times, The Wall Street Journal, YahooFinance, CNBC.com, and many more, and frequently speaks at seminars across the country.
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