Life Insurance During Open Enrollment
A guide on buying life insurance during open enrollment through your employer and its comparison to supplemental individual life insurance.
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Life Insurance Through Your Employer
There are two types of life insurance through your job: group life insurance and voluntary life insurance.
When you are first hired, there is typically a probationary period until you’re eligible for benefits. This period can vary but 90 days is common. After this time is up, employees are enrolled in the company’s group life insurance plan unless they choose to opt out.
After the probationary period you are also eligible to purchase extra coverage on top of your group coverage. This extra coverage is referred to as voluntary life insurance plans.
When is open enrollment?
The open enrollment period generally runs from November 1 to December 15 every year, although your state’s specific time frame may be slightly different.
If this period of time passes you need to wait until the next open enrollment period to make changes unless you have a qualifying life event (QLE).
According to Healthcare.gov, there are four basic types of QLE:
Loss of health coverage
- Losing existing health coverage, including job-based, individual, and student plans
- Losing eligibility for Medicare, Medicaid, or CHIP
- Turning 26 and losing coverage through a parent’s plan
Changes in household
- Getting married or divorced
- Having a baby or adopting a child
- Death in the family
Changes in residence
- Moving to a different ZIP code or county
- A student moving to or from the place they attend school
- A seasonal worker moving to or from the place they both live and work
- Moving to or from a shelter or other transitional housing
Other qualifying events
- Changes in your income that affect the coverage you qualify for
- Gaining membership in a federally recognized tribe or status as an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder
- Becoming a U.S. citizen
- Leaving incarceration (jail or prison)
- AmeriCorps members starting or ending their service
During open enrollment or a qualifying life event, you can opt in to voluntary life insurance plans offered through your employer or adjust your coverage if you are already enrolled.
What is group life insurance?
The cost of group life insurance is fairly inexpensive for employees, if not free. Many employers choose to pay these premiums on behalf of their employees as part of the benefit.
Group life insurance usually provides coverage for one or two times your salary up to a certain maximum, often $50,000. If your employer offers group life insurance for free or at a minimum, take advantage of this. Group life insurance has no medical requirements and you’re guaranteed coverage.
This additional coverage can be in the form of voluntary life insurance, which is offered through the same insurance company as the group coverage, or you can buy your own individual life insurance policy through any insurance company you’d like.
Not sure how much term life insurance you need?
What is voluntary life insurance?
Some employers also offer additional coverage on top of the group life insurance amount that you can purchase. This additional coverage is a separate plan referred to as voluntary life insurance.
These voluntary group life insurance plans are simple to purchase. You can often buy up to a certain amount (for example up to three times your salary) without providing evidence of insurability.
What is evidence of insurability?
Through this same plan, you probably have the option to buy even larger amounts of coverage, but you will have to provide evidence of insurability.
Because of these price increases, if you’re in relatively good health, it’s often much more cost-effective to buy a separate individually-owned term life insurance policy to cover any needs above your group life insurance.
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What is an individually-owned term life insurance policy?
If your employer cancels your group coverage benefits, your individually-owned life insurance policy is not affected. If you leave your job voluntarily or are terminated, your individually-owned life insurance policy is not affected.
With this term life insurance coverage, you choose the coverage amount and how long the coverage lasts. Term lengths range from 10 to 40 years depending on your age.
You do not need to renew year after year as you would with voluntary life insurance coverage. As long as you pay the premiums, the coverage continues until your chosen term length expires.
An individually-owned term life insurance policy is the best type of life insurance for most individuals looking to supplement their group life insurance coverage.
Why? Term life insurance is individually underwritten to you, the insured, whereas voluntary life insurance pricing is based on averages in a group.
With coverage offered through your employer, if you’re healthier than the average group of individuals, you may end up paying more than you would with an individually-owned term life insurance policy.
On top of this, term life insurance premiums are fixed. This means when you buy the policy, your premium won’t increase the entirety of the term. Your age and health won’t affect your premiums. Voluntary life insurance premiums are not fixed. They will increase as you age.
Consider the table below for a better idea of the cost of term life insurance versus voluntary life insurance.
Scenario: $100,000 Coverage for 30 Years for a 35-Year-Old Non-Smoking Male | |||
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Ages | Cost of Group Universal Life Insurance Coverage | Cost of Term Life Insurance Coverage Risk Class: Preferred Plus |
Cost of Term Life Insurance Coverage Risk Class: Standard |
35-39 | $540 | $815 | $1,280 |
40-44 | $756 | $815 | $1,280 |
45-49 | $1,188 | $815 | $1,280 |
50-54 | $2,160 | $815 | $1,280 |
55-59 | $3,510 | $815 | $1,280 |
60-64 | $5,292 | $815 | $1,280 |
Total overall cost after 30 years: | $13,446 | $4,890 | $7,680 |
What happens when my group life insurance premiums increase?
When employees realize their premiums are about to seriously jump, many start looking for other options. An individually-owned term life insurance policy is often the solution. While premiums for voluntary life insurance are quite high, term life insurance can still be very affordable in your 40s.
The table below compares the overall cost of voluntary life insurance to buying a term life insurance policy at age 45.
With an individually-owned term life insurance policy, you will be medically underwritten. If you have a serious medical condition, you may be uninsurable or your premiums may be extremely high.
If this is the case, it’s recommended you buy as much voluntary life insurance as you can during open enrollment.
Scenario: $100,000 Coverage for 20 Years for a 45-Year-Old Non-Smoking Male | |||
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Ages | Cost of Group Universal Life Insurance Coverage | Cost of Term Life Insurance Coverage Risk Class: Preferred Plus |
Cost of Term Life Insurance Coverage Risk Class: Standard |
45-49 | $1,188 | $941 | $1507 |
50-54 | $2,160 | $941 | $1507 |
55-59 | $3,510 | $941 | $1507 |
60-64 | $5,292 | $941 | $1507 |
Total overall cost after 20 years: | $13,446 | $3,764 | $6,028 |
Benefits of Buying Life Insurance During Open Enrollment
If your employer offers supplemental voluntary life insurance coverage you can buy, this may be very beneficial if you have health issues. You can buy a good amount of voluntary life insurance (typically up to three times your salary) without needing to provide any health information to the insurance company.
If you have tried to purchase individually-owned life insurance in the past and have been declined or couldn’t afford the premiums offered, buying employer-sponsored life insurance during open enrollment is your chance to secure that financial protection for your loved ones.
Premiums for an individual policy are based on each person’s gender, health, height, weight, smoking status, state you live in, family history, etc. You cannot just point to a rate chart for premiums and assume that will be your cost.
Quotacy’s life insurance quoting tool allows you to enter the information that pertains to your situation and view the estimated cost of term life insurance.
To see life insurance quotes, you do not need to provide your name or contact information, so no one will be calling you to try to sell anything to you. Take your time educating yourself on life insurance and determining how much coverage you want to purchase.
Type of Life Insurance | Pros | Cons |
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Group Life Insurance Policy |
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Voluntary Life Insurance Policy |
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Individual Term Life Insurance Policy |
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Here’s a helpful overview of the life insurance buying process.
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