Life insurance at open enrollment: is your employer's group plan enough?

By Max BasariaPublished November 7, 2026How we write guides

Fall is open enrollment season at most employers, and life insurance is usually one of the quickest boxes to tick. Many people accept the free basic cover, maybe add a little extra, and move on. That can be the right call, but group life has limits worth understanding before you decide it is your whole plan.

What basic group life usually gives you

The Texas Department of Insurance explains that a basic group policy through work usually pays a death benefit of one or two times your annual salary, though some plans cap it at a set dollar amount instead. Most group life is term cover, which means it pays only if you die while you are covered and builds no cash value.

The strengths are real:

• No health questions for the basic amount. Groups must offer the cover to eligible employees regardless of age or health, so you do not need a medical exam to get it.
• Low cost. Basic cover is often paid fully by the employer, and group rates for extra cover are usually cheaper than buying the same thing on your own, especially if you have health conditions that would raise an individual quote.

Supplemental cover: the open enrollment decision

Many employers let you buy more on top of the basic amount, often in multiples of salary, and add cover for a spouse or children. This is where open enrollment matters. Plans commonly let employees who enroll within a set window skip medical questions up to a certain amount, and ask for medical information above it. The Texas guide notes that you may need to answer health questions or take an exam if you want more than the basic group policy provides.

Before you elect supplemental cover, check three things in your benefits portal or plan booklet:

1. The guaranteed amount. How much can you add without health questions this year?
2. How the price changes with age. Check whether your plan’s rate per $1,000 of cover rises as you move into older age brackets, and at which birthdays.
3. What happens to spouse cover if you leave the job or the marriage ends.

The tax catch over $50,000

Employer-provided group term life has a tax rule most people never notice until they see it on a pay stub. Under IRS Publication 15-B, the cost of up to $50,000 of employer-provided cover is excluded from your wages. The cost of cover above $50,000 is treated as taxable income, often called imputed income. It is subject to Social Security and Medicare tax, shows up in boxes 1, 3 and 5 of your Form W-2, and is listed in box 12 with code C.

The IRS does not use your actual premium for this. It uses a fixed monthly rate per $1,000 of cover, based on your age at the end of the year. A few rows from the 2026 table:

For example, a 45-year-old with $150,000 of employer-paid cover has $100,000 above the limit. That is 100 times $0.15, or $15 a month, so $180 of imputed income for a full year. At 55, the same cover would add $43 a month, or $516 a year. The tax on that amount is usually small, but it grows with age. Any after-tax premiums you pay toward the cover reduce the taxable amount.

The bigger catch: it is tied to your job

The Texas Department of Insurance puts it simply: group coverage typically ends when you leave your job. That can include being laid off, changing employers or retiring. If you develop a health condition while you are covered and then lose the job, you could be shopping for an individual policy at an older age and with a worse health profile.

Most group plans offer a way to keep some cover after you leave:

• Conversion lets you turn group cover into an individual policy without proving you are healthy. New York law, for example, gives you 31 days after cover ends to apply, requires the insurer to accept you without evidence of insurability, and does not allow the converted policy to be term insurance. That means it is usually a permanent policy, and the premium at your age can be much higher than you paid at work.
• Portability, where offered, lets you keep group term cover by paying the premiums yourself. In New York it can be offered only on top of the conversion right, not instead of it.

Rules and deadlines vary by state and by plan, so read your certificate of coverage. The deadline is short, and missing it usually means the option is gone.

When a private term policy makes sense

Group life works well as a base layer. A private term policy often makes sense alongside it when:

• You need cover for a fixed number of years, such as until the mortgage is paid off or the children are independent, and want a price locked for that whole period.
• You might change jobs, start a business or retire early and do not want your family’s protection tied to one employer.
• You need more than the group plan’s limit or more than the guaranteed amount without health questions.
• You are healthy now. Group cover is usually cheaper, but individual underwriting prices your own health, so a healthy applicant’s fully underwritten term quote is worth comparing with group supplemental rates.

A practical approach is to work out your total need first (debts, years of income your family would need, final costs), subtract savings and the basic cover your employer pays for, and then decide how to fill the gap. Our guide to term versus whole life walks through that calculation, and life insurance over 50 covers what changes later in a career. If health would make individual underwriting difficult, group supplemental cover or a no medical exam policy may be the better route.

Open enrollment checklist

• Confirm the basic amount your employer pays for and whether it is a salary multiple or a flat sum.
• Check the guaranteed amount for supplemental cover and the deadline to elect it.
• Review and update your beneficiaries. You can name more than one.
• Note whether your plan offers conversion, portability or both, and how long you have to act after leaving.
• If you will have more than $50,000 of employer-paid cover, expect imputed income on your W-2.
• Get at least one individual term life quote to compare with the group price.

Group life is a valuable benefit. Treat it as one piece of your plan, not the whole of it.