Supplemental life insurance at work: worth it, or buy your own?

Your benefits portal is open for open enrollment. Somewhere between the medical and dental plans there's a line that reads "Supplemental life: 1x to 5x salary." It's cheap for some coworkers and oddly expensive for others, and nobody at the benefits fair could say whether you need it.

The short answer: Supplemental life insurance is group term life you buy through work on top of your employer's basic coverage. It's often worth electing when you need more coverage and can get it without health questions. But its price usually climbs with age, and it can end when you leave the job. Under OPM's published federal rates, the same coverage costs about 20 times more at 60 than at 35.

Key takeaways

• Supplemental life is optional group coverage on top of basic life, usually term. Unlike accidental death coverage, it pays for a death from illness, too.
• It's usually priced in five-year age bands. Federal Option B rises from $0.043 to $0.867 a month per $1,000 between ages 35 and 64.
• In KAV's example, $200,000 of that coverage costs $8.60 a month at 35 and $173.40 a month at 60.
• Electing it when you're first eligible can skip health questions, but the coverage usually stays with the job, not with you.
• Employer-provided group term coverage over $50,000 adds taxable "imputed income" to your pay. The death benefit itself generally isn't taxable.

What supplemental life insurance is, and what it isn't

Supplemental life insurance is optional group term life insurance you buy through your employer, on top of the basic life insurance the employer provides. You pick an amount during your enrollment window, and the premium comes out of your paycheck.

According to the Bureau of Labor Statistics (BLS), 59% of private industry workers had access to life insurance plans in March 2026 (BLS Employee Benefits in the United States). And among adults with life insurance, 27% have it only through work, according to the 2026 Insurance Barometer Study by LIMRA and Life Happens.

Your enrollment screen usually shows four separate pieces:

• Basic life. The coverage your employer provides, often free. Life Happens, a nonprofit consumer-education group, says it's "commonly one to three times your current salary" at larger companies (Life Happens).
• Supplemental life. Also called optional, voluntary or additional life. You pay for it, in multiples of salary or flat amounts.
• Accidental death and dismemberment (AD&D). It pays only when a death or covered injury comes from an accident. The federal handbook says optional life coverage is "payable when you die, regardless of the cause, even if accidental death benefits are not payable."
• Spouse and child coverage. Separate elections that pay you if your spouse or child dies, usually in much smaller amounts.

Supplemental life is usually term insurance, covering you only while you're enrolled. If your employer also offers a permanent (whole life) option, that's a different product with its own rules.

Why supplemental life costs more every five years

Supplemental life is usually priced by age band. The cost per $1,000 of coverage is set for an age range, and your premium jumps when a birthday moves you into the next one.

Your plan's rate table is in your enrollment materials. The federal government publishes its own for the Federal Employees' Group Life Insurance (FEGLI) program, which the Office of Personnel Management (OPM) calls "the largest group life insurance program in the world." Its handbook says optional coverage premiums "are based on five-year age bands beginning at age 35."

Here's what OPM charges federal employees each month per $1,000 of Option B, the supplemental coverage elected in multiples of pay (OPM FEGLI premiums, in effect since October 2021):

• Under 40: $0.043
• 40 to 44: $0.065
• 45 to 49: $0.130
• 50 to 54: $0.217
• 55 to 59: $0.390
• 60 to 64: $0.867

The Internal Revenue Service (IRS) values group term coverage for taxes with its own age table. It climbs the same way, from $0.09 per $1,000 a month at ages 35 to 39 to $0.66 at 60 to 64 (IRS Publication 15-B).

Two more things change the math as you age:

• Your pay. When coverage is a multiple of salary, a raise increases both the coverage and the premium.
• Age 65. A federal age-discrimination regulation notes that "It is not uncommon for life insurance coverage to remain constant until a specified age, frequently 65, and then be reduced" (Code of Federal Regulations, 29 CFR 1625.10). Your certificate of coverage lists any reductions.

Example: $200,000 of coverage from age 35 to 64

Take Erin, 35, a federal employee in Ohio who earns $100,000 and has two kids. She's an example, not a client. She elects two multiples of Option B, or $200,000 of supplemental coverage. At OPM's current rates, her monthly cost works out like this (KAV's arithmetic):

• 35 to 39: $8.60
• 40 to 44: $13.00
• 45 to 49: $26.00
• 50 to 54: $43.40
• 55 to 59: $78.00
• 60 to 64: $173.40, or $2,080.80 a year

Her first five years cost $516 in total. Her last five cost $10,404 for the same $200,000. All 30 years add up to $20,544, before any raise or rate change.

The coverage costs little while Erin's young and gets expensive in the years she'd keep it longest. If her kids will be through school by the time she's 55, the cheap bands cover most of her need. If she wants coverage into her 60s, she should compare that total with an individual term quote.

Should you elect supplemental life, waive it or buy your own?

Elect supplemental life when you need more than your basic amount and can get it now without health questions. Get an individual term quote first when you're healthy and your need runs past your 50s or past this job.

The enrollment window matters more than the price

Many workplace plans let you elect some coverage without health questions when you're first eligible. Above that amount, or if you sign up later, the insurer can ask for evidence of insurability (EOI). That's a health questionnaire it can turn down.

The federal plan shows how strict the window can be. Optional coverage must be elected "within 60 days of becoming eligible." After that, a federal employee usually waits for an open season or a life event, or waits a year and provides "satisfactory medical information at your own expense."

Electing at work can make sense if

• You have a health condition that could make individual coverage hard to get, and the plan offers an amount with no health questions.
• Your need is short, like the years until your youngest finishes school, and falls mostly in the cheaper age bands.
• You expect to stay with the employer as long as you need the coverage.

Get an individual term quote first if

• You're healthy and need coverage for 20 years or more. Life Happens warns that "Supplemental coverage can be more expensive than buying your own policy."
• You're in your late 40s or older, when each age band costs much more than the last.
• You might change jobs, retire early or be laid off. "Not all employer life insurance policies let you convert your supplemental life policy when you leave the company," Life Happens notes. Our guide to group vs individual life insurance covers what happens when you leave.

The National Association of Insurance Commissioners (NAIC), the group of state insurance regulators, says in its Life Insurance Buyer's Guide that with work coverage, "the death benefit usually is less than you need. And if you leave the employer, you may not be able to take this coverage with you."

Spouse coverage

Spouse coverage is worth a look if your family would struggle without your spouse's paycheck or the childcare they do. Amounts are often capped low: federal Option C pays $5,000 per multiple for a spouse, up to $25,000. If that's far below the need, see how much life insurance a stay-at-home parent needs.

Size it to a gap, not a default multiple. Start with how much life insurance you need, then subtract your basic coverage and any policy you own.

Is supplemental life insurance taxable?

The death benefit generally isn't taxable to your beneficiary. But employer-provided group term coverage over $50,000 can add taxable "imputed income" to your paycheck.

• The $50,000 line. Employers "can generally exclude the cost of up to $50,000 of group-term life insurance coverage" from your wages. The cost above that is added to your wages, "reduced by the amount the employee paid toward the insurance." It shows up in box 12 of your W-2 with code C (IRS Publication 15-B).
• How the cost is figured. The IRS uses its age table, not your premium. In its own example, a 45-year-old with $200,000 of coverage who pays $100 a year has $170 added to taxable wages.
• Whether your supplemental counts. It depends on how your plan is set up and priced. The IRS counts a policy the employer "directly or indirectly" carries, which can include coverage employees pay for. Check your pay stub for an imputed income line, or ask human resources (HR).
• Before tax or after tax. Some employers take premiums before tax through a cafeteria plan, which the IRS allows for group term life; others don't.
• The payout. Life insurance proceeds you receive as a beneficiary "aren't includable in gross income and you don't have to report them," says the IRS. Interest paid on top is taxable.

Before your enrollment window closes

1. Open your benefits portal. Write down your basic amount, the supplemental multiples, the no-health-questions limit and the rate table by age.
2. Estimate what your family would need, then subtract your basic coverage and any policy you already have.
3. Price the supplemental amount at your age now and at the age your need ends.
4. Get one individual term quote for the same amount and years, and ask whether its premium stays level.
5. Check the beneficiary on every coverage you elect, including spouse and child coverage.

If you'd like a second set of eyes on this, KAV Solutions offers a free life insurance review. A licensed insurance professional reads your policy with you: your group certificate, any individual policy you own, and whether the supplemental amount fills a real gap. The review is free and you never pay KAV a fee. If you choose to buy a policy, the insurer pays the professional a commission. For tax decisions, bring the numbers to a tax professional.

Frequently asked questions

KAV Solutions is a women-led team of licensed insurance professionals based in Pennsylvania. This article is general education, not individualized financial, tax, or legal advice. Coverage amounts, age bands, rates and conversion rights vary by employer plan, insurer and state.