Sep 22, 2022
Understanding severance packages (Part 4 of 5)
Part 4: Insurance
Whether you’ve been at your place of employment for one year, one decade or your entire career, being dismissed from your job is never easy.
Aside from the emotional aspects of upending your daily routine and leaving colleagues you’ve become close to, your sense of identity may also take a jolt as people are often defined – rightly or otherwise – by what they do for a living.
As you weigh your options for next steps, such as finding another job in your field, trying a new career path, starting your own business, or retirement, there are important financial considerations related to being let go.
In our five-part series on severance-related issues, we’ll explore several key areas pertaining to your finances that you should know about, in case you find yourself in this challenging position.
In this article, we discuss 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 a structure for your 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, you must 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). When 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.
Having adequate insurance helps you stay prepared in case you or any of your eligible family members encounter unexpected health care 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 health care 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, relative to getting a new policy elsewhere. Typically, you may convert your group policy to an individual policy with no evidence of insurability required. 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 if you’re looking to maintain coverage.
When it comes to disability insurance, your coverage often ends on your workplace separation date. Individual private coverage can be expensive and may be difficult to qualify for, so if you wish or need 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 corporate executives and professionals make decisions about their severance and navigate this complicated, often overwhelming 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 may impact (or even negate) your insurance coverage. Contact a CI Private Wealth advisor today to learn more and to see if you’ll still have the required coverage.
Other topics in this series
- Severance and deferred compensation
- Stock awards and your investment portfolio
- Pension plans
ABOUT THE AUTHOR
Lisa is a Partner and Wealth Advisor at CI Brightworth and has served as chairwoman of CIPW’s Business Development Committee. 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 CI 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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