Group life insurance
Life insurance issued under one master policy to cover members of an eligible group, such as employees, union or association members, or debtors. Each person receives a certificate showing the amount, beneficiary and conditions, while the employer, association, trustee or creditor holds the policy. Continuing or converting coverage depends on the policy, certificate and state law.
Also called: group insurance, group coverage
Life insurance offered through an employer is usually group life insurance. You do not own the policy; your employer or another group holds the master contract, and you hold a certificate that shows your amount and your beneficiary. Because coverage is tied to your place in the group, it can end when the job or membership ends unless you port or convert it in time.
How the tax rule works, with real numbers
For employer-provided group-term life insurance, the first $50,000 of coverage your employer carries is excluded from income, and the cost of coverage above that amount is added to your wages using an IRS rate table, according to the IRS group-term life insurance page (opens in a new tab). IRS Publication 17 (opens in a new tab) works an example for a 51-year-old employee with coverage from two employers.
Hover or tap a row to highlight it.
| Step | Calculation | Result |
|---|---|---|
| Total coverage | $35,000 (Employer A) + $45,000 (Employer B) | $80,000 |
| Coverage above the exclusion | $80,000 − $50,000 | $30,000 |
| Yearly cost at the age-51 rate of $0.23 per $1,000 per month | $30,000 ÷ $1,000 × $0.23 × 12 | $82.80 |
| Premiums the employee paid | $4.15 × 12 | $49.80 |
| Added to taxable wages | $82.80 − $49.80 | $33.00 |
The $33.00 does not reduce the death benefit; your beneficiary is still covered for $80,000. It is the taxable value of employer-carried coverage above $50,000, and it may also be subject to Social Security and Medicare taxes. Plan design, employer contributions and your own certificate can change the result.
Coverage options and what each changes
More coverage generally costs more, and the exact amount and price come from your certificate, enrollment materials or policy schedule. The common pieces, according to the NAIC's small business insurance overview (opens in a new tab) and the NAIC Group Life Insurance Model Act (opens in a new tab):
- Employer-paid basic coverage. Often about one year of salary, set as a fixed amount, a salary multiple or by employment class. It may cost you nothing directly.
- Voluntary or contributory coverage. You pay all or part of the premium through payroll deduction, and extra amounts can require evidence of insurability.
- Term or permanent coverage. Most employer-paid group coverage is term insurance, which applies during the coverage period. Group plans can also offer permanent forms such as whole life insurance, with cash value and different premium and tax rules.
- Dependent coverage. The model act allows spouse and child coverage, capped at 50% of the employee's amount.
- Guaranteed issue amounts. Group policies are typically guaranteed issue, with no medical exam for eligibility, but supplemental amounts or late enrollment can bring health questions back.
- Conversion. You may replace ending group coverage with an individual policy without evidence of insurability. Under the model act, you generally apply and pay the first premium within 31 days, and the price uses your attained age and risk class, so it can be very different from the payroll deduction.
- Portability. Some policies let you keep coverage after leaving by paying the premium yourself. It is a contract feature, separate from conversion.
Where you see the term
Group life is a life insurance term, distinct from group health insurance even though both use master policies and certificates. You meet it on benefits enrollment forms, in benefits booklets, on certificates issued under employer, union, association, creditor or trust policies, and on coverage pages that list the amount and beneficiary. It also shows up as a payroll deduction, on renewal notices that change your amount or premium, in conversion or portability notices after you leave, and in a beneficiary's claim packet. The master policy holds eligibility, exclusions, beneficiary, termination and conversion rules that the certificate may not reproduce in full.
What Connecticut and New York add
In Connecticut, a person insured under a group life policy can assign all or part of the ownership rights, including the right to name a beneficiary or to obtain an individual policy after employment ends, unless the policy restricts it, under Conn. Gen. Stat. § 38a-455 (opens in a new tab). The employer or group policyholder must give each insured employee notice at least 15 days before group life coverage is cancelled or discontinued, with fines of up to $2,000 per violation, under § 38a-456.
In New York, group life policies must include a conversion right: when coverage ends or is reduced because of employment, class or policy changes, you can apply within 31 days, without evidence of insurability, for an individual policy based on the lost amount, priced at your attained age and risk class, under N.Y. Insurance Law § 3220 (opens in a new tab). The same section requires notice of the conversion privilege, and a late notice can extend the time to act.
Questions to ask your employer, agent or insurer
- What is my basic and supplemental coverage amount, and is it fixed or tied to salary? A salary change can change a salary-based benefit.
- Who pays the premium, and how much is deducted from my pay? That separates employer-paid from voluntary coverage and flags possible taxable coverage above $50,000.
- Does coverage continue if I leave, retire, take disability leave or lose eligibility? This identifies termination, waiver, portability and conversion rights.
- What is the deadline and cost to convert or port, and is medical evidence required? Conversion may need no evidence, but the premium follows your attained age and risk class.
- Who is the beneficiary on record, and does the certificate match? The policy pays the designated beneficiary, subject to its terms and the law.
Frequently asked questions
These answers add detail on the questions people ask when they enroll, change jobs or file a claim.
Does group life insurance follow me if I leave my job?
Not automatically. Your certificate and the master policy decide whether portability or conversion is available, and conversion windows are short, commonly 31 days. Missing the deadline can leave you with no death benefit from that plan.
Is group life insurance the same as voluntary life insurance?
No. Group life is the policy structure. Voluntary life is extra group coverage that you choose and pay for, and it can be term or permanent insurance.
Is employer-paid group life insurance taxable?
The first $50,000 of employer-carried group-term coverage is excluded from income. The imputed cost above $50,000 may be added to your wages and reported on your Form W-2, according to the IRS.