Before you click Enroll, check 4 numbers

Open your benefits screen and write these down. Each takes a minute to find.

• Number 1

  Your employer-paid coverage: the basic amount you get without paying, often a multiple of salary or a flat amount.

• Number 2

  The supplemental you can add, and its guaranteed-issue limit: the most you can get without health questions.

• Number 3

  What an individual term policy would cost. Get one outside quote for the same amount so you have a price to compare.

• Number 4

  Your portability or conversion deadline if you leave. Find it in your group certificate before you need it.

The 30-second decision

• KEEP

  Keep the free coverage. It’s yours while you work there.

• ADD AT WORK

  Add supplemental when you have a gap and the workplace price, or its no-medical-questions limit, beats what you’d get on your own. That’s often true if you’re older or have health issues.

• COMPARE OUTSIDE

  Compare an individual policy when you’re healthy and want coverage you own regardless of your job.

• LEAVING SOON

  If you might leave within a couple of years, coverage you own matters more, and your portability or conversion deadline matters most.

• CHECK THE TAX LINE

  Employer-carried coverage over $50,000 adds “imputed income” to your W-2 — sometimes even on coverage you pay for.

Is Life Insurance Through Work Enough?

It’s enough only if it covers what your household would need — and the only way to know is to measure the gap.

Workplace coverage is common: the Bureau of Labor Statistics reports that 59% of private-industry workers had access to life insurance plans in March 2026. But access to a plan says nothing about whether the amount fits your family. The check takes four steps:

• 1. Estimate what you need. That’s a separate question with its own method; see How Much Life Insurance Do I Need?
• 2. Subtract your employer-paid coverage. This is the basic amount on your benefits screen.
• 3. Subtract any individual coverage you own. Policies you bought yourself count in full.
• 4. What’s left is your gap. Use the gap tool above to run it in a minute.

Hypothetical example: a household decides it needs $800,000. The employer pays for 1× a $75,000 salary, so $75,000. There is no individual policy. The gap is $800,000 − $75,000 = $725,000.

Is 1× salary enough? Usually only if your household needs very little replaced. Coverage equal to one year of pay replaces one year of that income. Hypothetical: if a family would need eight years of a $75,000 income, that is $600,000, and 1× salary leaves a $525,000 gap before counting debts or other needs. Your own number depends on your dependents, debts, savings and other income. The needs guide walks through it.

What Your Benefits Screen Actually Offers

Most workplace life insurance menus have four parts: basic coverage, supplemental (voluntary) coverage, spouse and child coverage, and AD&D.

Group life insurance at work is almost always group term: coverage for one year at a time, renewed with the group, with no cash value. You get a certificate summarizing the coverage, not a standalone policy. The master contract and certificate control the details, so plan terms vary.

Is “voluntary” the same as “supplemental”? Often the labels overlap. “Voluntary life insurance” means you choose to opt in and usually pay; “supplemental life insurance” means coverage on top of the basic amount. Check your plan documents for how your employer uses each word.

The same screen usually offers other protection that isn’t life insurance. Disability coverage replaces income while you’re alive but can’t work, and it is worth a look at the same time; see Disability Insurance.

Supplemental Life at Open Enrollment: Is It Worth It?

It’s worth it when it closes a real gap and the workplace price, or its no-medical-questions limit, beats your outside options. That’s often the case if you’re older, have health conditions, or are enrolling in your new-hire window.

Five factors decide most cases:

• Age. Workplace premiums usually rise by age band, while individual level term holds its price for the term. Younger buyers often find the individual route cheaper; at older ages, price both. See why workplace rates rise with age.
• Health. If you’d face higher prices or limited approval on your own, guaranteed-issue workplace coverage can be hard to match.
• Guaranteed issue. The amount you can add without health questions. Find your limit on the benefits screen. See guaranteed issue and evidence of insurability.
• Evidence of insurability (EOI). Amounts above the limit, or late enrollment, may require a health questionnaire or exam, and the increase may not start until the insurer approves it.
• Job tenure. If you may leave soon, coverage you own is safer. See what happens when you leave.

To compare fairly, get an outside quote for the same amount and term, then compare the monthly cost today and at the age bands you’ll reach while still at your job. For how level term differs from permanent coverage, see Term vs. Whole Life Insurance.

Why Workplace Rates Rise With Age

Many workplace supplemental plans price coverage by age band, so your premium steps up each time you move into an older band, while individual level term holds its price for the length of the term.

Bands often span five years, and the price is typically reset at renewal. Hypothetical example, not a quote: suppose a plan charges $0.06 per $1,000 per month in one band. For $250,000 that’s 250 × $0.06 = $15 a month. If an older band charges $0.20, the same coverage costs 250 × $0.20 = $50 a month. Real charts vary widely.

Level term has its own catch: when the term ends, the price resets at your new age. Neither route is cheaper in every case, so ask HR for the full rate chart and price the bands you’ll reach.

Guaranteed Issue and Evidence of Insurability

Guaranteed issue is the amount you can get without answering health questions; evidence of insurability (EOI) is the health information the insurer can require for anything above it or for late enrollment.

• New-hire window. The window when you first become eligible is typically when the highest amount is available without health questions. Check how long your window lasts.
• Increases at open enrollment. Raising coverage above the limit generally requires EOI. Some plans allow a small increase each year without it. Ask what yours allows.
• Approval timing. An increase that needs EOI usually starts only after the insurer approves it, which can be later than January 1.
• Answer accurately. Inaccurate health answers can create problems at claim time. See Why Life Insurance Claims Get Denied. Keep a copy of what you submit.

The $50,000 Rule: Imputed Income on Your W-2

Under Section 79 of the tax code, the first $50,000 of employer-carried group-term life coverage is tax-free to you, and the imputed cost of coverage above $50,000 is added to your taxable wages.

The IRS says the cost of coverage above $50,000 is included in income using the IRS Premium Table and is subject to Social Security and Medicare taxes. That added amount is “imputed income”: you don’t receive it as cash, but it is treated as pay. Your employer reports it on your W-2 in boxes 1, 3 and 5 and also shows it in Box 12 with Code C. Employers aren’t required to withhold federal income tax on it, but because it is included in Box 1 it is still part of your taxable income on your return. If your total employer-carried coverage is $50,000 or less, there is no imputed income. This is separate from whether a death benefit is taxable; for that, see Is Life Insurance Taxable?

How the cost is figured

• Take your total employer-carried coverage and subtract $50,000.
• Round the excess to the nearest $100, then express it in thousands.
• Multiply by the monthly rate for your age band in the IRS table below, using your age on the last day of the tax year (December 31). The IRS applies that one age to all coverage in the year, so a birthday in December can move you into the next band for the whole year.
• Multiply by the number of months of coverage (prorated if a month is partial), then subtract what you paid toward the coverage with after-tax dollars. Ask payroll how your deduction is treated: payments that come out pre-tax through a cafeteria plan are not after-tax contributions.

The IRS worked example

Publication 15-B gives this example: an employee aged 45 has $200,000 of employer-provided coverage and pays $100 a year toward it. The covered amount above $50,000 is $150,000. The yearly cost is 150 × $0.15 × 12 = $270, reduced by the $100 the employee paid, so $170 is included in wages and shown in Box 12 with Code C.

For year-end planning that touches benefit elections, see Year-End Tax Moves.

When Coverage You Pay For Still Counts (the Straddle Rule)

Coverage you pay for yourself can still create imputed income if the plan is treated as “carried by the employer” under the straddle rule.

The IRS says a policy is considered carried directly or indirectly by the employer if either of these is true:

• 1. The employer pays any cost of the insurance, or
• 2. The employer arranges the premium payments, and the premiums paid by at least one employee subsidize those paid by at least one other employee (the “straddle” rule).

The test uses the IRS Premium Table rates, not the actual cost. If some employees are charged more than the table rate and others less, the premium charges straddle it. The IRS states that the resulting benefit is taxable even if the employees pay the full cost they are charged.

IRS Example 3

A 47-year-old employee receives $40,000 of coverage under a policy carried by her employer. She is also entitled to $100,000 of optional insurance at her own expense, and that amount is also considered carried by the employer. The cost of $10,000 of it is excludable, because the $50,000 exclusion is shared with the first $40,000. The cost of the remaining $90,000 is included in income. If the optional policy were not considered carried by the employer, none of the $100,000 would be included in income.

Arithmetic using the 2026 table (our calculation, not the IRS’s): age 47 falls in the 45 to 49 band at $0.15. 90 × $0.15 × 12 = $162.00 for a full year, less any after-tax contributions toward that coverage.

The flip side: the IRS’s examples 1 and 2

• Example 1: All employees are aged 40 to 44, so the table rate is $0.10. The employer pays the full cost. If at least one employee is charged more than $0.10 per $1,000 and at least one is charged less, the coverage is considered carried by the employer, and each employee owes Social Security and Medicare tax on the cost of coverage over $50,000.
• Example 2: Same facts, but every employee is charged the same insurer-set rate and the employer pays nothing. It doesn’t matter what the rate is: if the employer neither subsidizes nor redistributes the cost, the coverage is not considered carried by the employer.

You usually can’t tell from the benefits screen which situation applies. Ask HR or payroll whether the supplemental is treated as employer-carried, and check Box 12 Code C on your W-2 after the year ends. The IRS also notes that policies from the same insurer are generally tested together, while policies from different insurers are tested separately. Section 79 also has special rules for small groups and key employees, so your employer’s answer controls.

Spouse and Child Coverage

Employer-paid life insurance on your spouse or dependents is tax-free up to $2,000 of face amount, and most spouse and child coverage you buy through work is paid by you.

The IRS excludes employer-paid group-term coverage on an employee’s spouse or dependent when the face amount is not more than $2,000, as a de minimis fringe benefit. Pub. 15-B adds that a larger face amount may still be excludable if the excess cost over what the employee paid after tax is so small that accounting for it is unreasonable or impractical. If part of the dependent coverage is taxable, the same IRS Premium Table is used as for the employee.

• Amounts and limits. Spouse coverage is often offered in increments up to a plan maximum, and child coverage is usually a small flat amount. Many plans tie spouse coverage to the employee’s coverage, so it may end if yours does.
• Health questions. Spouse amounts above a guaranteed-issue limit may need evidence of insurability.
• Who owns it. The coverage sits under your certificate. If you leave, ask whether your spouse can port or convert their own coverage.
• Tax. Imputed income is a question about employer-paid coverage; coverage you pay for with after-tax dollars generally isn’t the issue here. Confirm with HR how your plan is treated.

If your household depends on two incomes, consider your spouse’s coverage in your gap analysis, not just yours; How Much Life Insurance Do I Need? shows how.

AD&D Is Not Life Insurance

AD&D pays only when death or a covered injury results from an accident, so it can’t replace life insurance for most causes of death.

AD&D is often bundled with basic life at no extra cost or sold cheaply on its own. Whether you need it comes down to price and to whether you already have enough life and disability coverage. It can be a reasonable extra if it fits your budget, but don’t count it toward your life insurance gap. Read the exclusions, which can carve out some causes of death and injury, and note that “dismemberment” benefits pay scheduled partial amounts for covered losses.

What Happens When You Leave Your Job

Employer-provided group life coverage usually ends with your job, so check your certificate for when it ends and what you can keep.

• If you quit. Coverage typically ends on your last day or at the end of that month. Find the date in your certificate or ask HR in writing.
• If you’re laid off. The same deadline applies, and the stress of a layoff makes it easy to miss. Severance terms sometimes extend benefits, so check them. See Should You Sign a Severance Agreement? and COBRA Insurance for health coverage. COBRA is a health-coverage rule; group life usually relies on portability or conversion, not COBRA.
• If you retire. Some plans keep a reduced amount for retirees, some end coverage, and some allow portability or conversion. If employer-provided coverage over $50,000 continues after you leave, the IRS says the former employee pays the employee share of Social Security and Medicare tax on that coverage with their tax return, and the employer reports the uncollected amounts in Box 12 with codes M and N.
• If you switch jobs. Your new employer’s coverage may start after a waiting period, and new-hire guaranteed issue may be limited. Avoid a gap by lining up coverage before the old plan ends.
• If you become disabled. Ask whether your certificate offers a waiver-of-premium or extension provision, and ask early; these have their own notice deadlines.

Portability vs. Conversion

Portability continues group term coverage (usually at group-based rates) after you leave, while conversion turns your group coverage into an individual permanent policy, generally without new medical underwriting.

• PORTABILITY

  Continues term coverage after you leave, with the price and limits set by the plan. Whether you must answer health questions depends on the plan.

• CONVERSION

  Changes group coverage into an individual permanent policy, generally with no new health questions, priced at individual rates.

Many certificates include a provision that pays the group benefit if you die during the conversion window, even if you haven’t yet applied. This varies, and the wording and limits differ by plan, so ask HR to confirm it in writing. For what permanent coverage is and whether it fits your budget, see Term vs. Whole Life Insurance and Is Whole Life Insurance Worth It?

If you are healthy, pricing individual term coverage you would own, before your last day, may beat both options. Compare quotes for the same amount.

Your Leaving-Your-Job Checklist

Work through these in order, and start the day you learn you’re leaving.

FAQ

Is life insurance through work enough?

It is only enough if its amount covers your household’s need. Measure the gap: need minus employer coverage minus coverage you own. See the gap tool.

Is supplemental life insurance worth it?

It can be, when you have a gap and the workplace price or guaranteed-issue limit beats your outside options. Price an individual policy for the same amount before deciding.

Is voluntary life the same as supplemental?

The words often overlap. Voluntary means you opt in and usually pay; supplemental means coverage on top of the basic amount. Check your plan documents.

Is workplace life insurance cheaper than individual?

Sometimes, especially for older or health-challenged buyers. Healthy younger buyers often find individual level term cheaper. Get a quote for the same amount to compare.

Why does my supplemental premium go up?

Many plans price by age band, so your premium steps up when you enter an older band. Some plans also adjust rates for the whole group.

What is evidence of insurability?

Health information the insurer can require, such as a questionnaire or exam, for coverage above a guaranteed-issue limit or for late enrollment.

Can I increase coverage at open enrollment without a medical exam?

Possibly, up to a plan limit. Increases above the limit often require evidence of insurability and may not start until approved. Ask what your plan allows.

What is imputed income on life insurance?

It is the taxable value of employer-carried group-term coverage above $50,000, calculated with the IRS Premium Table and added to your wages. You don’t receive it as cash.

Why is there a Code C on my W-2?

Box 12 Code C shows the taxable cost of group-term life coverage over $50,000. The same amount is included in boxes 1, 3 and 5.

Is supplemental life I pay for taxable?

It can be. If the policy is considered carried by the employer under the straddle rule, coverage over $50,000 creates imputed income even when you pay the premiums. Ask HR how your plan is treated.

What’s the straddle rule?

A policy counts as employer-carried if the employer arranges the premiums and at least one employee’s premiums subsidize another’s, measured against the IRS Premium Table rates.

Is spouse life insurance through work taxable?

Employer-paid spouse or dependent coverage up to $2,000 face amount is excluded as a de minimis benefit. Coverage you pay for with after-tax dollars generally isn’t the concern. Confirm with HR.

Is AD&D the same as life insurance?

No. AD&D pays only for covered accidental deaths and injuries, and most deaths aren’t accidental.

Does life insurance end when I quit?

Employer group coverage usually ends with employment, often on your last day or at month-end. Check your certificate for portability or conversion rights.

What happens to life insurance if I’m laid off?

The same rules apply as when you quit, but check severance terms, which can sometimes extend benefits. Find the portability and conversion deadline right away.

What’s the difference between portability and conversion?

Portability continues group term coverage under plan terms; conversion changes your group coverage into an individual permanent policy, priced at individual rates.

How long do I have to convert?

Your certificate sets the deadline. It is often about 31 days, sometimes longer. There’s no universal deadline.

Can I convert without a medical exam?

Conversion is generally offered without new medical underwriting, but the amount, price and rules come from your certificate. No price or approval is guaranteed.

Should I have both workplace and individual coverage?

Many people do. Workplace coverage is convenient while you’re employed, and an individual policy stays with you if you leave. Whether you need both depends on your gap and your health.

Does retiring end my group life insurance?

It can. Some plans end coverage at retirement, some keep a reduced amount, and some allow portability or conversion. Ask HR before your last day.