Coverage, premium: What happens to corporate health insurance after layoff

An employee who is laid off by an organisation has to figure out if their corporate health insurance remains valid. Are voluntary top-ups, paid out of pocket by employees to enhance base coverage, valid once employment is terminated? Such questions create confusion.

 

Understanding corporate health insurance

 

Corporate health insurance is provided to employees and sometimes their families. It offers basic health insurance and employees can enhance it through top-up plans that require additional premiums. Top-ups are popular as employees seek higher coverage to address rising healthcare costs.

 

What happens to the corporate health insurance top-up premium in the event of a layoff?

 

 

“In such a circumstance, the coverage will cease to exist. Typically, corporate health insurance ends when an employee leaves the firm, which includes complex situations like layoffs. Notably, employees may not receive refunds of top-up premiums unless their policy has a provision for mid-term cancellation. Policies that allow midterm cancellation may offer a pro-rata refund of the unused coverage,” said Shilpa Arora, COO and co-founder of Insurance Samadhan.  Calculate EMI: EMI Calculator Tool

 

“However, this feature will depend on several factors, including the insurer’s refund policy, cancellation process, and claim history. This is why I recommend reviewing the policy terms of corporate plans and checking whether they account for refunds during layoff. If premium amounts are paid in installments, a refund may not be initiated after the coverage kicks in. It is important to note that the final installment deducted from their full and final settlement could cover the remainder of the policy term.”  “If you rely solely on company-provided health insurance, you should carefully evaluate its terms and conditions. Check whether the sum insured is sufficient to cover major medical expenses or you would need a top up for the same, and whether your family members (spouse, children or parents) are included. Understanding exclusions, co-payments, sub-limits and other such factors could provide a thorough understanding of your coverage and out-of-pocket costs, if any, during claim settlement,” said Ajay Shah, Head – Distribution, Care Health Insurance.

 

Options for employees

 

To ensure continued health insurance coverage after being laid off, employees can consider these steps:

 

Porting policies: Before leaving the organisation, employees should check with their insurer or HR department about porting their group insurance into an individual plan. This allows them to retain continuity benefits like waiting periods for pre-existing conditions.

 

Buying individual policies: Purchasing a standalone health insurance plan ensures uninterrupted coverage. While premiums may be higher than group policies, this option provides long-term security and independence from employment status.

 

Emergency backup plans: It is advisable to maintain a personal health insurance policy alongside corporate coverage to avoid gaps during transitions or layoffs.

 

Ashish Yadav, head of product and operations at ManipalCigna Health Insurance, explained why people should buy personal medical insurance along with company insurance?

 

Continuity of coverage: Corporate health insurance ceases when employment ends due to layoffs or resignation. Personal insurance ensures uninterrupted coverage.

 

Customisation: Personal health insurance can be tailored to individual needs, offering flexibility in coverage and add-ons like critical illness protection.

 

Higher coverage Limits: Corporate plans often have limited coverage amounts and may not include family members or specific benefits like maternity care.

  Long-term security: Personal health insurance is portable and remains active regardless of job changes, providing stability in unpredictable times.