Group life insurance

What's good about it

• Often provided at no cost up to a basic amount
• Guaranteed issue up to a limit — no health questions, which matters if your health is complicated
• Available immediately on eligibility, with no application process to speak of
• Supplemental amounts often available cheaply through payroll

The four gaps

• It ends with the job — redundancy, resignation and retirement all remove it, usually at the moment income is disrupted
• The amount is usually a modest salary multiple, often calculated on base pay only, excluding bonus, commission, differentials and overtime
• Above the guaranteed issue limit, supplemental amounts generally require evidence of insurability anyway
• You don't control it — the employer can change or end the plan

What happens when you leave

Two mechanisms usually exist, both with short deadlines. Portability lets you continue group coverage by paying the premium directly. Conversion lets you exchange it for an individual permanent policy without proving your health.

Both typically have to be exercised within a limited window after coverage ends — often a matter of weeks. Miss it and the option is gone.

Conversion in particular can be valuable if your health has changed. Find out now what your plan offers and what the deadline is, because you'll be dealing with it during a job change.

The tax point

Employer-provided group term coverage has a tax exclusion limit under Internal Revenue Code section 79 — the cost of coverage above $50,000 generally creates imputed income. That's why generous group coverage sometimes shows up on a pay stub as taxable.

Confirm your own treatment with a tax professional.

Use it correctly

Treat group coverage as the free layer on top of a policy you own, not as the foundation. The policy you own doesn't care where you work, doesn't shrink at retirement, and can't be changed by someone else's benefits decision.