Why Portability Matters in Employee Benefits
September 15, 2021
The pandemic provided several learning lessons relating to insurance and the portability feature of various employee benefits. Those who never thought much of life insurance and other health related insurance products suddenly became acutely aware of their value. A direct result of the pandemic was an increase in the sale of many insurance products.
When hundreds of thousands of Americans suddenly lost their jobs, what also became clear was the importance of having insurance products that were portable. What this means is, if an employee is terminated, leaves a job or retires, their insurance can travel with them with no interruption of their coverage as long as premiums are paid. There is more to understand about portability which should be shared with all employees/plan members.
The Goals of Portability
Insurers added portability features to their policies as a means of achieving certain objectives. Specifically, portability is intended to help provide greater financial security to working people in the event their status with a specific employer should change. Another goal of portability is to give all workers, regardless of whether they are full-time or part-time employees, temporary workers or sub-contracted/independent contractors the opportunity to purchase insurance that is not employer-dependent. This is necessary in today’s gig economy where the labor market has a large number of short-term, freelance and contract workers. Within certain industries, making insurance products available to all workers has been more prominent than others largely because their workforces consist of a mix of various types of employees. The construction industry is a good example of this, as are peak season businesses such as landscaping, retail, hospitality, and tourism.
The Advantage of Portable Voluntary Benefits
The advantage of portability is especially clear in voluntary benefits. Employees, who purchase various portable voluntary insurance products and other benefits (e.g., legal services, ID theft protection, etc.) at the worksite, can do so with confidence knowing that their coverage will remain in force as long they are paying their premiums. A layoff, permanent loss of a job, or the decision to retire is not going to end the financial protection gained from their portable policies.
Among the voluntary products that insurers offer with a portability feature are insurance products such as: Accident, Accidental Death & Dismemberment, Critical Illness, Disability and Life Insurance (both Whole Life and Term Life), Dental and Vision. Some insurers also have a portability feature associated with certain group products such as Group Life, for example. Sometimes, there are conditions on the portability feature such as the coverage can continue if the insured was terminated or retires. Many insurers enable Group Life insurance benefits to be converted to an individual policy under the conditions that the insured either retired or his/her employment was terminated.
It is important to know that the portability feature does not alter a policy’s provisions. This, however, does not mean that the insured does not have the opportunity to change their coverage amounts to better meet their life circumstances going forward. For employers/plan sponsors and employees/plan members, portable voluntary benefits are a win-win especially given that the competitive rates of these products.