After long decades of being employed and diligently putting money away for retirement, you’re finally at the point where you can make work optional. Perhaps you plan to pursue a passion project, consult, or sit on boards. Or maybe you want to move to a lock-up-and-go and see the world.
This is something we see a lot with our clients. They get to a point (often before the “standard” retirement age of 65) where they don’t want to be employed anymore. And when that happens, we have decisions to make.
Up to that point, the client will usually have had most of their long-term insurance products (life insurance, critical illness, etc) through their company’s employee benefits scheme. Now, they have to take those over in their personal capacity. And that’s where the continuation option comes in.
Read more: How To Decode Your Company Benefits Statement
What is a continuation option?
If any of your corporate benefits offer a continuation option (also called a conversion option), that means that you can take that benefit with you if you leave the company. You will still enjoy the same benefit while you were at the company, it will just be in your name, and you will be paying for it with no company subsidisation.
Honestly, this is golden – because it can save you, not only the hassle of a lot of admin, but also potentially a lot of money and exclusions.
Why it’s a good idea to take the continuation option
It’s well known that the older you get, the less likely insurance companies are to give you affordable insurance on your life or your health. They might also start excluding things – like any claims relating to your back if you've got a back problem, for example. That’s the issue that comes with getting cover when you're older.
The nice thing about taking the continuation option is that the insurance company usually won’t do medicals on you when you leave. They typically do two things: an HIV/AIDS test and, if you say you're not a smoker, they do a cotinine test to see if there's nicotine in your blood (side note: smokers are smashed with higher premiums – if ever you needed a reason to quit, there it is).
However, they typically don't ask you about the other underlying issues that you might be dealing with, such as any co-morbidities you might have. You get the same cover you’ve always had, and you don’t have to deal with:
- The hassle of medical underwriting (ever experienced the frustration of trying to find the date you saw a physio about a sprained wrist when you were 23?)
- Potential exclusions based on existing or previous medical conditions
- Potential premium increases for having the audacity to be over the age of 50.
Watch: What high-earning professionals get wrong about employee benefits
How to exercise the continuation option on your company benefits
When you leave the company that gave you all these benefits, you normally have about a month – sometimes two months – to exercise the continuation option. Set up a meeting with your financial planner and say, “I'm employed by this company and I've got these benefits. I saw that there's a continuation or conversion option.”
Your planner will then contact that insurance company and say, “My client is an employee there. They're leaving. Let's get quotes to see how much that cover will cost.”
You’ll get the quotes and, if you’re happy with the premiums and the cover they provide, your financial planner will help you manage the admin of transferring that cover into your personal capacity.
A fancy pen is always nice, but when it comes to parting gifts from your employer, a continuation option on your long-term insurance benefit is going to make a much bigger difference to your life!
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