Making Sure You’re Covered During A Short Gap In Employment

February 25, 2019

As much as we all love our jobs (at least I do), sometimes for one reason or another we find ourselves considering a new career opportunity. One of the fun things about switching jobs is that, if we arrange it just so, we get a little time off between finishing up one job and starting the next. Recently, this was the case for a friend’s husband. They were so excited about him having some time off without having to take vacation days that they forgot all of the repercussions this can have.

The ripple effect of even a short employment gap

In their case, not only was he going to have a one week gap in employment, but he wouldn’t be covered by health, dental, disability and life insurance right away at his new job. They asked me to help them look at the risks this posed and decide what to do.

The most important thing: health insurance

The first consideration was health insurance. While the risk was very small that he would actually need health insurance during that week, an unexpected accident or health event is far from impossible and could be catastrophic to their finances without the proper insurance. Luckily, he checked with the benefits department at his current employer and found that his current insurance would cover him until the end of his last month at work, but that was going to leave 4 days of the next month uncovered until he started his new job.

He decided to check with the new employer to see if there was any way to start his new insurance on the first of the month, but that wasn’t going to be a possibility, so that led us to consider other options:

1. COBRA – Many employees have access to COBRA coverage when they leave a job which would typically provide for up to 18 months of insurance at the full premium, but it is usually very expensive. The nice thing, however, is that there is a 60 day window for applying and coverage is retroactive to the first day of eligibility, so you can take the wait and see if needed approach before signing up.

Caveat: This would have worked well except that because he had been working for a small employer (less than 20 employees), he was not covered by COBRA.

2. Healthcare.gov – Losing coverage is a qualifying event for enrolling in health insurance through the marketplace mid-year. For someone who needs coverage for a longer period of time, this may be an option to at least consider.

3. Spouse’s policy – If you are married and your spouse can get coverage through work, that is an option as well. Again, even though open enrollment is over, because he lost coverage mid-year, that is a qualifying event allowing my friend to add him to her coverage through her employer. We did look at this option, as she could have added him for one month and then removed him once he had coverage through his new employer. The cost was not too bad, but there was yet another option to consider.

4. Short term insurance –We decided to check out the option of a short term policy with a very high deductible. He would only be needing the coverage in the case of a true emergency, so they were effectively reducing their risk from hundreds of thousands of dollars down to $12,000 (the average deductible), which is much more palatable. The cost was reasonable as well, so this option seemed to make the most sense for them.

5. Bubble wrap – The only other option I could think of would be for him to confine himself to the house and be a couch potato for 4 days to take away his risk of an accident, however, I suppose he could still have a heart attack, so that isn’t even a perfect solution!

Other insurance coverage gaps

To address the issue of not having dental, life or disability insurance for a while, they decided to add him to my friend’s work policy for dental and get life and disability insurance in the private market. Since they don’t really need the extra coverage, once he’s enrolled in those coverages through his new job, they will likely discontinue those policies.

Let’s not forget the income gap

Lastly, having a week off between jobs may also mean that you miss out on a week’s worth of income (unless you have vacation pay coming to you). To handle that, make sure that you have enough in savings to comfortably cover the gap in income for that time period while still maintaining the recommended 3 to 6 months worth of living expenses in your savings account.

Taking even just a couple days between jobs can feel like a real break, so take the opportunity if you can. And don’t forget to enjoy some down time!