Federal law requires continuation of coverage when an employee or beneficiary loses insurance coverage because of certain events. In Arizona, disability insurance policies must provide for the right of covered family members to continue coverage after the death or divorce of the named insured (AZ Stat. Sec. 20-1377).
The insurer can choose whether to continue coverage under the existing policy or to issue a converted policy. Coverage provided by such a conversion policy must provide the same benefits as the terminated policy, unless a lesser form of coverage is chosen by the insured. Continuation or conversion of coverage may, at the option of the spouse exercising the right, include covered dependent children for whom the spouse has responsibility for care or support.
The individual exercising the continuation or conversion rights must notify the insurer and make payments of the appropriate premium within 31 days after the termination of the existing policy. Conversion is not available to a person who is eligible for Medicare or covered by other similar disability benefits that, together with the conversion coverage, would constitute overinsurance.