Employer-provided life insurance

Employer-provided life insurance includes group life insurance and supplemental life insurance, also known as voluntary life insurance..

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Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

&Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

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Maria Filindras

Maria Filindras

Financial Advisor

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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Employer-provided life insurance is more commonly known as group life insurance, also called group term life insurance. Group life insurance is one single life insurance contract that covers a group of people, in this case: a contract that covers a company's employees. Employers commonly offer group life insurance as part of a benefits package: 60% of non-government workers had access to employer-provided life insurance in 2021. [1]

Group policies are easy to qualify for and often free, but they rarely provide the level of coverage you need. For some people who may not qualify for a personal term life insurance policy, a group policy plus additional coverage through supplemental life insurance can provide essential protection.

But most people who need life insurance should buy a term life insurance policy to complement their group plan.

What is group life insurance?

Group life insurance is usually offered by employers, but may also be offered by unions and trade organizations. As the name suggests, coverage is offered to a large group, rather than an individual.

Group term life insurance is often subsidized by the policyholder (e.g., your employer), so you pay little or none of the policy’s premiums. You get coverage up to a limit, usually $50,000 or one to two times your annual salary (up to a limit).

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How does group life insurance work?

Other than the coverage restrictions and who owns the policy, group life insurance works essentially the same as an individual term life policy:

  • Monthly or annual payments keep the policy active.

  • Policies expire after a certain period (for group life, coverage is often renewed yearly by the policyholder).

  • The insurer pays a death benefit to a designated beneficiary for most causes of death.

Most employers don’t let you keep your group life insurance if you leave the company. If they do let you take the coverage with you, it’s usually more expensive to keep it than to buy a new policy on your own.

Keeping or converting your group policy can be a good option if you've had difficulty qualifying for your own life insurance in the past. The process doesn't require a medical exam.

→ Learn more about personal term life insurance options

How much does group life insurance cost?

The cost of group life insurance depends on the company or organization that manages your policy. You may need to contribute some money to your premiums or the cost may be completely covered, meaning your group life insurance would be free for you.

Is group life insurance taxed?

If your group coverage exceeds $50,000, you could be on the hook for some taxes. Above that amount, the IRS considers any premiums your employer pays to be imputed income, a benefit that is not part of your salary but is taxable. [2]

The taxable amount varies on an individual basis, but you may be able to find it on your paystub as a line item labeled "group term life" or "GTL." This indicates the premiums your employer paid toward your coverage that are taxable.

How to get group life insurance

You can usually enroll in an employer-sponsored group life plan when you start a job. If you don’t enroll when you're hired, you can sign up during an open enrollment period or if you have a qualifying life event, such as:

  • Birth or adoption of a child

  • Coverage loss

  • Death in the family

  • Divorce

  • Marriage

Unlike most life insurance policies, your health and age rarely impact whether you qualify for group life insurance, and you probably won’t need to go through an individual underwriting process to get coverage.

Should you get group life insurance?

There’s no reason not to join your company’s life insurance plan. It’s an easy, affordable way to start or add to your financial safety net for your family. But, if any loved ones rely on you financially, you should own a personal term life insurance policy, too.

Policygenius experts recommend having a death benefit of at least 10 to 15 times your income to prevent your family from being underinsured — significantly more than an employer-sponsored plan offers.

"The combination of benefit limits, inability to customize, and portability restrictions means that only having life insurance coverage through your group plan will almost always leave you under-protected,” says Patrick Hanzel, Advanced Planning Specialist and certified financial planner at Policygenius. “A strong financial plan requires limiting these risks whenever possible."

Signing up for free life insurance coverage is a good idea for just about anyone, and especially for people who might struggle to qualify for an individual policy. But group life insurance alone isn’t enough coverage for most people, so you should pair it with an individual policy. You'll avoid a coverage gap and ensure your loved ones are fully protected.

quote

Only having life insurance coverage through your group plan will almost always leave you under-protected.

- Patrick Hanzel

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What is supplemental group life insurance?

Your company may give you the choice to buy life insurance coverage on top of your employer-sponsored plan. This is called supplemental life insurance, optional life insurance, or voluntary life insurance.

The type of coverage and specifics around premiums vary by employer. Some employers offer a choice between additional term or whole life insurance. Some allow you to add riders to your group life insurance policy. For other businesses, voluntary life insurance may only refer to additional accidental death and dismemberment (AD&D) or burial insurance.

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How to get supplemental life insurance

Like your employer-sponsored group life insurance, it’s likely a supplemental policy will be guaranteed issue up to a certain amount — guaranteed-issue policies are aimed at paying final expenses and usually don't require medical prerequisites for approval. However, if you’d like to add supplemental coverage that is greater than your employer’s set coverage limits, you may need to provide more information to the insurer. 

This could be as simple as completing an Evidence of Insurability (EOI) form and sharing financial information with an underwriter, or you could be required to go through a full medical exam. If you have health problems or can’t prove a financial need for supplemental coverage, you could be declined.

Cost of supplemental life insurance

The cost of voluntary life insurance varies based on:

  • How much coverage you want

  • Your age

  • Whether your employer subsidizes any premiums

Insurance companies usually categorize employees and assign group insurance premiums by age. The older you are, the higher your rates will be. If your voluntary life insurance is a guaranteed issue policy, then you might pay more than you would for an underwritten private policy, since you’ll be skipping the insurer’s health and risk evaluation.

Depending on your policy, your supplemental coverage might be portable. That is, you might have the ability to take it with you if you lose or leave your job. However, if you do choose to the policy with you, the premiums often go up substantially once you leave the group life plan.

Who should get supplemental life insurance?

Supplemental life insurance can make sense if you’ve been declined private life insurance in the past because of your age or a chronic illness. In that case, supplemental life insurance through your employer could be a good way to get the additional coverage you need.

If you don’t need a large amount of supplemental coverage (for example, if your mortgage is paid off and you no longer have children to support but are looking to cover burial expenses), then a guaranteed issue supplemental policy can help you avoid a medical exam or other questions about your insurability.

Frequently asked questions

What is a group term life insurance plan?

Group term life insurance is owned by one organization (usually an employer) but covers many people. It pays a benefit to your beneficiaries if you die while the policy is active.

What’s the difference between group life and term life insurance?

Group life insurance covers many people with one policy, whereas term life insurance covers one person. Group life offers less coverage and is cheaper and easier to qualify for than term life.

What are the disadvantages of group life insurance?

Group life insurance rarely provides the amount of coverage you need, and you can't take it with you if you leave the job or organization that manages the policy.

What happens to group life insurance if you leave your job?

You either lose the policy or have an option to continue paying for the coverage on your own, often at a much higher rate. You can usually find a cheaper individual policy.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. Bureau of Labor Statistics

    (BLS). "

    Employee Benefits in the United States — March 2021

    ." Accessed November 15, 2021.

  2. Internal Revenue Service

    (IRS). "

    Group-Term Life Insurance

    ." Accessed November 15, 2021.

Authors

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

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Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

Editor & Licensed Life Insurance Expert

Amanda Shih

Editor & Licensed Life Insurance Expert

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Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Expert reviewer

Financial Advisor

Maria Filindras

Financial Advisor

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Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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