Who this is for
Workers reviewing basic and supplemental life insurance during open enrollment.
60-second summary
Employer life insurance can be useful, especially basic employer-paid coverage. But it is often tied to employment, may be limited to a multiple of salary, may require evidence of insurability above guaranteed-issue amounts, and may not be portable at the same cost after leaving the job. Employer-provided group-term life insurance coverage above $50,000 can also create taxable wage treatment under IRS rules.
Fact sheet
Basic life
Employer-provided coverage, often a flat amount or multiple of salary.
- Often automatic or low-cost.
- May not be enough for dependents.
- Usually tied to employment.
Supplemental life
Extra life insurance the employee elects and pays for.
- May be available in salary multiples.
- May require evidence of insurability above guaranteed-issue amounts.
- Costs can rise with age bands.
Taxable group-term life issue
- IRS rules generally allow exclusion of up to $50,000 of employer-provided group-term life coverage from wages.
- Coverage above $50,000 can create imputed taxable wages.
- This is usually not a reason to avoid needed coverage, but it explains a common paycheck/W-2 surprise.
Portability and conversion
- Ask what happens if you leave the employer.
- Portable coverage may cost more.
- Conversion may be available but not always attractive.
The one-times-salary problem
A worker has one times salary in basic life insurance but a mortgage, student loans, a spouse, and a child. The employer benefit helps, but it is not a full household protection plan.
Paycheck Impact Calculator
Common mistakes
- Assuming employer life insurance is enough.
- Forgetting coverage may end with the job.
- Ignoring evidence-of-insurability rules.
- Not naming beneficiaries.
- Not noticing imputed income over $50,000 of employer-provided coverage.
Key takeaway
Employer life insurance is useful, but workers should compare it to household needs and understand job dependency, underwriting, portability, and beneficiaries.
Accident vs. Critical Illness vs. Hospital Indemnity Insurance
Compare what each supplemental policy pays, what triggers a benefit, and when the payroll deduction may or may not be worthwhile.
Want to run the numbers instead?
After the next article, you can also jump into a calculator or return to the full open enrollment path.
Paycheck Impact Calculator
Compare premiums, expected care, employer account money, and bad-year exposure before choosing a plan.
Out-of-Pocket Max Estimator
Use this when you want to understand how much covered in-network cost-sharing room may remain.
Open Enrollment Guide
Go back to the full ordered article path, tools, and final checklist.