Extra life insurance at open enrollment: worth it?

What you're actually buying

Most employer plans have two layers:

• Basic life, which your employer pays for. It's often a flat amount or one times your salary.
• Supplemental (voluntary) life, which you pay for through payroll deduction, usually in multiples of salary or set dollar amounts. There are often options for a spouse and kids too.

Most employers run open enrollment sometime between October and December, for coverage that starts January 1. That makes this the one window each year when many plans let you add or increase coverage.

Where the work deal shines

• Guaranteed issue. Many plans let you buy up to a set amount with no health questions, at least when you're first eligible. If you have a heart condition, diabetes or a history that makes individual underwriting ugly, that's real value.
• Convenience. It comes out of your paycheck, and you don't have to fill out a separate application.
• Cheap at younger ages. Group rates in your 20s and 30s can be very low.

The catches nobody mentions at the benefits table

• The price usually climbs. Most supplemental life is priced in age bands, so the rate steps up as you move into each new bracket, often every five years. What's cheap at 35 can be expensive at 55, right when you'd least want to lose it.
• It's tied to the job. Quit, get laid off, change contractors or retire, and the coverage typically ends. Some plans let you take it with you (portability) or convert it to an individual policy, usually at higher rates and within a short deadline.
• Above the guaranteed amount, you answer health questions anyway. Anything over the guaranteed-issue limit usually requires evidence of insurability, which is the same kind of underwriting as an individual policy.
• Big employer-paid coverage can show up on your W-2. Under IRS rules, the cost of employer-provided group-term life coverage above $50,000 counts as taxable income, reduced by whatever you paid toward it.

A policy tied to your badge is only as permanent as the job.

How to decide in about ten minutes

For a lot of families, the best mix is an individual term policy as the foundation, plus the work coverage as a bonus layer, especially the free basic amount.

Five things to check before you click enroll

• The guaranteed-issue limit for you and your spouse.
• The age-band rate table, so you can see what the same coverage costs at 50 and 60.
• Whether it's portable or convertible if you leave, and the deadline to do it.
• Whether spouse coverage ends if the employee's coverage ends.
• Your beneficiary designations. Open enrollment is the easiest time to fix an ex-spouse or a "my estate" that should have been updated years ago.

A note for union members

If your life insurance comes through a union health and welfare fund, it may not run through an employer open enrollment at all. Eligibility usually depends on hours worked. That's its own topic, covered in what happens to union life insurance after a layoff.

Want the work offer laid side by side with individual quotes from several carriers before your enrollment deadline? That takes about one phone call. See life insurance with CraftWright.

Common questions