What happens to your life cover when you leave your job

Why people are caught out by this

Death in service is usually described as a multiple of salary — four times, sometimes more — and it is genuinely valuable. Because it appears on a benefits statement each year, it comes to feel like something you hold. It is not: the employer owns the scheme, the employer pays for it, and your membership ends when your employment does.

The practical effect is that a family can go from four times salary of cover to nothing overnight, at the exact moment household income has also stopped. Redundancy is the worst version of this, because the cover disappears alongside the salary.

Group income protection ends the same way. If you were relying on an employer scheme to cover long-term sickness, that reliance ends with the job too.

Ask about a continuation option before you go

Some group schemes include a continuation option, which allows a leaver to take out an individual policy with the same insurer without further medical underwriting. It is not universal, it is rarely advertised, and it is almost always time-limited — often to a window of 30 or 60 days after leaving.

For anyone in good health it may not be the cheapest route, since ordinary underwritten cover is often better value. For anyone whose health has changed since they joined the employer, it can be extremely valuable, because it sidesteps the underwriting that would otherwise be the problem.

It is worth one email to HR or the scheme administrator before your last day. Ask specifically whether the scheme has a continuation option, what the deadline is, and what evidence is required.

Arrange personal cover before you hand in your notice

Cover is priced on the day you apply — your age, your health and your occupation at that moment. Arranging it while employed and healthy is straightforward. Arranging it after a period out of work, possibly with the stress-related health disclosures that redundancy can bring, is harder and more expensive.

There is no requirement to be employed to hold life insurance, so a gap in work does not prevent cover. But income protection is different: it insures earnings, so it is far simpler to put in place while you have an income to evidence.

If you are moving to a new employer with its own scheme, personal cover still has a place. It is portable across every job change you make afterwards, it is not capped by a salary multiple, and it does not vanish the next time you move.

Retiring early, or going self-employed

Both are moments where employer cover ends and nothing automatically replaces it. Going self-employed removes sick pay entirely as well, which makes income protection more important rather than less — and it should ideally be arranged before the change, while there is still an employment record and payslips to evidence.

If you are retiring early, the question becomes whether anyone still depends on your income or would face a liability on your death — a mortgage, an inheritance tax exposure, a partner without a pension of their own. The answer is often yes for longer than people assume.