Insurance You Keep Explained

When we talk about “insurance you keep,” we mean the coverage that stays with you as your life, job, or property changes. It’s the policies you maintain rather than the ones that end automatically. That could be health insurance you pay for after leaving an employer, a group life policy you convert to an individual policy, or homeowners insurance you renew year after year. Understanding what “insurance you keep” really means helps you avoid coverage gaps, control costs, and protect financial stability.

Why “Insurance You Keep” Matters

Insurance is a promise: when the unexpected happens, your insurer pays or helps pay. But insurance is only useful when it applies at the right time. Too often people lose coverage without realizing it — leaving sensitive gaps in health care, income protection, or financial legacy planning. That’s where the idea of insurance you keep becomes critical.

Here are the main reasons it matters:

Continuity of protection. Keeping certain policies ensures there’s no interruption — especially for health, disability, and long-term care insurance.
Cost control. Replacing coverage later can be more expensive. Premiums are based on your age and health, so staying covered now can save money long-term.
Risk management. Some losses (medical bills, mortgage payments) can quickly derail financial plans. Retaining key insurance reduces that risk.
Estate and legacy planning. Life insurance you maintain can secure mortgages, fund a child’s education, or leave a legacy.

Common Types of Insurance People Keep

Not every policy fits everyone, but certain kinds of insurance are frequently kept when circumstances change. Below is a practical overview of common policies and why people often choose to keep them.

Health Insurance. Often portable through COBRA or special marketplace plans. Many people keep health coverage to avoid high out-of-pocket medical costs.
Group Life Insurance. Employers sometimes provide basic life insurance. Some policies can be converted to individual term or permanent life after employment ends.
Disability Insurance. This replaces income if you can’t work due to injury or illness. Keeping an existing policy can be much cheaper than buying a new one later.
Long-Term Care Insurance. Benefits are crucial later in life. Keeping a policy in place can lock in favorable underwriting done at a younger age.
Auto and Homeowners Insurance. Easy to keep — usually simply renew. Continuity is important because gaps can raise future premiums.
Umbrella Insurance. Affordable extra liability coverage that many keep to shield assets.

How Portability Works: Key Mechanisms for Keeping Coverage

“Portability” is the mechanism that lets you keep coverage outside the original context (for instance, when you leave a job). Here are the typical options you’ll encounter:

Conversion Rights. Some group life policies offer a conversion option: you can convert group life into an individual permanent policy without evidence of insurability. It often costs more but guarantees coverage regardless of health changes.
COBRA and State Continuation. In the U.S., COBRA allows eligible employees to continue group health coverage for up to 18 months (sometimes more) by paying the full premium plus a small administrative fee.
Ported Individual Policies. Some insurers offer “portability” for disability or long-term care policies if you move between employers or become self-employed.
Conversion Periods and Deadlines. Many rights to keep coverage have strict deadlines (e.g., 30, 60, or 90 days). Missing those windows can mean losing the option to keep coverage.

Real-World Examples and Figures

Below are realistic scenarios and numbers to help you see how decisions about keeping insurance can affect your finances. These are illustrative figures based on common market ranges as of recent years; actual premiums will vary by age, location, health, and insurer.

**Table 1: Typical Costs When You Keep or Replace Coverage**
Type of Coverage	Keep (Convert/COBRA/Port)	Replace Later (Buy New)	Example Monthly Cost (Age 40)
Group Term Life (convert to individual)	Yes — Conversion allowed in many plans	May require new underwriting; higher cost if health worsens	$60–$250 (individual term vs. permanent varies)
Health (COBRA)	Yes — up to 18 months; you pay full premium + 2%	Individual Marketplace plan; may have subsidies	$600–$1,200 (full family COBRA premium)
Disability Insurance	Yes — some policies portable	New policy may be 50–200% more if health changes	$80–$300 (group benefit equivalent to $5,000/month)
Long-Term Care	Usually non-portable; keep to avoid higher future cost	New policy premiums up to 2–3x more at older ages	$200–$700 monthly (varies widely)

Example: Sarah, age 42, leaves her job and has a group life benefit of $200,000 and employer-paid long-term disability. She has 60 days to decide. If she converts her group life to an individual whole life policy, her new monthly premium might be $220. If she buys a new term policy instead, an underwritten $200,000 20-year term policy could be $35–$60/month if she’s healthy — but if she has a new diagnosis, the cost could be much higher or the policy denied. Converting protects Sarah against future health changes, but it costs more up-front.

Decision Framework: Should You Keep It?

When trying to decide whether to keep a particular insurance, consider this simple framework: Need, Cost, Alternatives, Timing, and Health. Below is a step-by-step approach that’s easy to use.

Assess the need. Ask: What risk does this coverage protect? How severe would the financial impact be without it?
Calculate the cost. Compare the cost to keep the policy vs. the expected cost of replacing it later (or self-insuring).
Explore alternatives. Are there cheaper ways to get similar protection (e.g., marketplace health plans with subsidies, term life instead of whole life)?
Consider timing and deadlines. Note any conversion or COBRA deadlines and mark them on your calendar.
Factor in health and underwriting. If you’re likely to become uninsurable or see higher rates in the future, keeping coverage can be worth the price.

**Table 2: Quick Decision Matrix for “Keep vs Replace”**
Question	Keep	Replace
Is the coverage critical (income replacement, ongoing medical care)?	Usually — keep	Only if you have reliable alternatives
Is the premium affordable relative to your emergency fund?	Yes — keep	No — consider subsidized or cheaper alternatives
Will health changes likely make replacement impossible/expensive?	Yes — keep	No — replacement may be an option
Does keeping lock in rate or guaranteed insurability?	Yes — strong reason to keep	No — replacement may be fine

Sample Calculations — Realistic Scenarios

Let’s walk through three realistic scenarios with figures to show how the math works. These examples will help you understand the trade-offs between keeping coverage and replacing it later.

Scenario A: Health Insurance After Job Loss (COBRA)

Assume a family health plan costs $1,050 per month through the employer. Under COBRA, the ex-employee pays the full premium plus a 2% admin fee, so monthly cost = $1,050 × 1.02 = $1,071.

Options:

COBRA for 12 months: 12 × $1,071 = $12,852
Marketplace Silver plan with premium tax credits: estimated $420/month after subsidy = $5,040/year

Decision drivers: If the family has ongoing medical needs (e.g., a child with a chronic condition), the COBRA plan may have better provider networks or lower cost-sharing, making it worth keeping despite the higher monthly cost. If care needs are routine and subsidies are substantial, switching to a marketplace plan could save ~$7,800 in the first year.

Scenario B: Group Life Conversion

John has a $250,000 group term life benefit from his employer. He leaves his job at age 50 and has conversion rights for 31 days. Conversion to an individual whole life policy might cost $385/month. Buying a new 20-year term $250,000 policy at age 50 could be $125–$200/month if fully underwritten and healthy.

However, if John has developed diabetes or another health issue, he might be denied or quoted much higher rates. Converting guarantees a policy without new underwriting but at a higher price. If John’s family can tolerate a temporary reduction in coverage, they might buy a lower-cost term and supplement later. If insurability is a concern, convert.

Scenario C: Disability Insurance for a Self-Employed Person

Maria, age 35, had long-term disability coverage through a former employer that covers $4,000/month until age 65. She has 60 days to port or convert the benefit. Porting costs $150/month. Buying an equivalent individual policy through the open market could be $220–$350/month depending on occupation and health.

Choosing to port saves $70–$200 monthly while preserving the benefit level and the original elimination period. For someone who relies on earned income and has limited emergency savings, porting is often the right move.

Tax and Legal Considerations

Insurance decisions can have tax and legal implications. Here are the main points to keep in mind:

COBRA premiums are paid with after-tax dollars but may be deductible as medical expenses if you itemize and meet thresholds.
Life insurance payouts are typically income tax-free for beneficiaries, but interest and estate-tax considerations may apply in large estates.
Disability benefits are taxable if the premiums were paid by an employer and not included in your taxable income; if you pay the premiums yourself with after-tax dollars, benefits are usually tax-free.
Policy ownership. When you convert a policy, who owns it matters for estate planning. Keep ownership and beneficiary designations up to date.

How to Keep Insurance — Practical Steps

Here’s a straightforward checklist to make sure you keep the policies that matter and don’t miss important deadlines.

Inventory your policies. List all health, life, disability, long-term care, auto, homeowners, and umbrella policies. Note coverage amounts, insurers, agent contact, and expiration or conversion dates.
Mark deadlines in your calendar. Conversion windows and COBRA enrollment periods are often 30–60 days. Set multiple reminders: 45 days, 20 days, and 3 days before the deadline.
Request written conversion/portability rules. Get the insurer’s conversion form and policy terms in writing. Don’t rely solely on a verbal assurance from HR.
Compare costs. Obtain quotes for conversion, porting, COBRA, and replacement policies. Use identical coverage assumptions (insurable amount, elimination periods) for fair comparison.
Consult an advisor. Talk with a licensed insurance agent or financial planner if the numbers are large or the consequences are significant. They can run scenarios and explain tax implications.
Secure proof of insurability alternatives. If you’re concerned about future health changes, ask about guaranteed insurability riders or conversion features that lock in purchase rights.
Update estate documents. If you keep life insurance, ensure beneficiaries and ownership align with your estate plan.

Common Mistakes and How to Avoid Them

People often make avoidable errors when deciding whether to keep insurance. Here are the common pitfalls and simple ways to prevent them.

Missing deadlines. Mistake: You assume you have more time. Fix: Put deadlines in multiple calendars and request the conversion paperwork right away.
Assuming new policies are always cheaper. Mistake: You assume buying new coverage later will be cheaper. Fix: Compare premiums given your age and health — sometimes conversion is cheaper in the long run.
Not reading the fine print. Mistake: You skip the details about what’s covered or excluded. Fix: Read the policy terms or ask your HR/insurer specific questions in writing.
Failing to coordinate benefits. Mistake: Overlapping coverage can waste money; gaps leave you exposed. Fix: Coordinate policy start and end dates carefully.

When It’s Not Worth Keeping Coverage

There are situations when dropping or replacing coverage makes sense. Consider these examples:

If premiums for retention are prohibitively high and you have a stable alternative (e.g., affordable individual health plan or spouse’s policy).
If the insurance duplicates other coverage (for example, you have an adequate group policy through a spouse at lower cost).
If the policy has poor value relative to its cost (e.g., a whole life policy with low cash value growth versus buying a low-cost term policy and investing the difference).
If the insurer’s solvency or reputation is questionable. In that case, moving to a financially stable carrier may outweigh the portability benefits.

Checklist: Before You Decide to Keep Insurance

Use this short checklist to guide your final decision. Print it, or keep it on your device for quick reference.

Policy inventory completed and up-to-date.
Deadlines noted and reminders set.
Written conversion/portability rules obtained.
Cost comparison for keep vs replace completed.
Health risk and insurability considered.
Tax and estate implications reviewed.
Decision discussed with a trusted advisor if amounts are material.

FAQ: Quick Answers About Insurance You Keep

Q: How long do I have to decide about converting group life?
A: It depends on your employer’s plan, but 30–60 days is common. Check plan documents immediately after separation.

Q: Is COBRA coverage expensive?
A: COBRA requires you to pay the full employer premium plus up to 2% administrative fee, so it is often more expensive than what you paid while employed. However, it preserves the exact same network and benefits.

Q: Can I port disability insurance if I change careers?
A: Some group disability plans offer portability or conversion options, but not all. Ask the insurer for portability rules and whether the occupation definition changes benefits.

Q: What if I miss the conversion window?
A: If you miss the window, you generally lose the guaranteed right to convert. You may have to apply for new coverage and go through underwriting, or rely on other options like a spouse’s plan.

Q: Should I always convert group life to whole life?
A: Not always. Conversion to whole life guarantees permanent coverage but at higher cost. Some people convert only part of the benefit or opt for a new term policy if they can pass underwriting and want lower premiums.

Putting It All Together: A Practical Example

Meet Alex and Priya, a married couple in their early 40s. Alex is leaving a job that provides a $300,000 group life policy, employer-paid disability, and family health coverage. They have two kids and a mortgage.

They follow the decision framework:

Assess the need: Losing Alex’s disability and life coverage would create a financial gap — mortgage payments and daycare would be at risk.
Calculate the cost: Conversion estimate for life: $320/month. Porting disability: $180/month. COBRA family health: $1,050/month. Marketplace alternative for health: $430/month after subsidy.
Compare options: They decide to convert $150,000 of the group life to a permanent policy and buy a new 15-year $150,000 term policy for the balance, keeping premiums manageable. They elect marketplace health coverage and port the disability policy for 12 months while they stabilize their freelance income.
Act on deadlines: They both fill conversion paperwork within 20 days and enroll in marketplace coverage before COBRA runs out.

Result: Their monthly outlay increased by $350 compared to the employer-paid package but protected the most critical risks. They prevented a coverage gap and preserved insurability for the long-term.

Conclusion — Simple Rules to Remember

Insurance you keep is a strategic choice, not a default. Use these simple rules:

Keep coverage that protects your most significant financial risks (income, major medical needs, and liabilities).
Act before deadlines — missing a conversion or COBRA window can be costly.
Compare true costs — include both premiums and potential future increases due to underwriting changes.
Get everything in writing and, when in doubt, consult a licensed advisor.

Taking time now to inventory policies, calculate costs, and meet portability deadlines can save thousands of dollars and a lot of stress later. Insurance is meant to give you peace of mind — making smart decisions about which insurance to keep helps ensure that promise is kept.

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Insurance You Keep Explained