What is Dependent Life Insurance? Who Qualifies as a Dependent for Insurance?
Life insurance policyholders who want to add coverage for their spouse or child to their existing policy can usually do so by adding dependent life insurance coverage.
Dependent coverage options vary by insurer and plan, but are typically limited to a much lower amount than would be available through an individual policy. Though coverage for dependents can be added to both individual and group life insurance policies, most people associate voluntary dependent life insurance with coverage obtained through their employer.
How does voluntary dependent life insurance work?
Voluntary dependent life insurance, also known as dependent group life insurance, is frequently made available as part of an employer's benefits package. Depending on the rules of the plan, dependent insurance can cover your spouse, children, and any other eligible dependents. If a covered dependent dies, you will receive the face value of the dependent life insurance policy as the death benefit because the employee is automatically designated as the beneficiary.
- Group and dependent life insurance, like health insurance, can only be purchased during open enrollment or after certain qualifying events, such as being hired or getting married. In addition, unlike an individual life insurance policy, coverage may not begin immediately if you choose dependent life insurance. For example, if you decide to buy coverage for your spouse during open enrollment, the policy may not take effect until January 1.
You may be required to provide evidence of insurability for your dependents depending on when you opt in for dependent life insurance coverage and the amount of coverage you want to purchase. This usually entails filling out forms with basic health and medical questions about your family so that the insurer can assess their risk.
Coverage options and cost of dependent life insurance
Dependent coverage is typically sold in increments of a specific dollar amount, such as $2,000 or $10,000. For example, a plan may allow you to purchase up to $10,000 of dependent insurance per child in $2,000 increments, allowing you to purchase either $2,000, $4,000, $6,000, $8,000, or $10,000 of coverage per child. Every dependent life insurance plan will specify a maximum amount of coverage per eligible dependent, with spouses typically having higher limits than children. But your dependent coverage options may also be limited by the amount of group coverage you purchased for yourself. Their maximum coverage is frequently limited to 50% to 100% of your supplemental coverage.
Dependent life insurance can be purchased for just your spouse, just your children, or for all eligible dependents, but most plans do not allow you to cover just one child. However, this has no bearing on the cost; all children are typically covered at the same rate as a single child, and the dollar amount is simply determined by the amount of coverage purchased. Supplemental spouse life insurance rates will generally be higher because adults are considered to be more likely to die, and will vary depending on the amount of coverage purchased as well as your spouse's age.
- For example, the monthly premium for your children's coverage could be $0.15 per $1,000 of coverage, implying that $10,000 of coverage would cost $1.50 per month. Whereas your spouse's monthly premium would be $0.60 per $1,000 of coverage, with price increases every five years as he or she gets older.
Premiums for dependent coverage, as well as the cost of any voluntary life insurance you've purchased for yourself, are deducted from your paycheck after-tax.
Dependent coverage after you leave an employer
Because child life insurance policies are not typically convertible, when a child's eligibility for dependent insurance expires, they will simply no longer have life insurance. Dependent life insurance policies, on the other hand, frequently include a conversion option that can be used if:
- You retire, quit or are terminated from your position
- You divorce your spouse
By converting the dependent policy to an individual life insurance policy, your spouse can maintain life insurance coverage without demonstrating proof of insurability. Your options in terms of which insurers you can use and the types of policies you can convert to will most likely be limited. For example, you may be limited to converting to a permanent life insurance policy, such as whole or universal life insurance.
Employers may offer the option of continuing a dependent life insurance policy after an employee's retirement date if they meet certain age or tenure requirements. This is not common, so we recommend checking with your plan administrator to see if your family qualifies.
Who qualifies as a dependent for life insurance?
To purchase dependent coverage on someone, they must first qualify as a dependent under the definitions in your group life insurance plan. Most policies allow you to add dependent life insurance for your children and spouse if they meet certain criteria. For example, many supplementary life insurance plans, like health insurance, consider children to be dependents until they reach the age of 26. Although it is less common, some group plans allow you to purchase life insurance for other adult dependents.
Who can qualify | Common restrictions |
Spouse | The definition of a spouse for supplemental life insurance usually includes anyone who is recognized as your husband or wife by state law. It can also include a common-law spouse if the marriage was legally recognized by your jurisdiction. A domestic partner may not be considered a spouse and, if so, wouldn't be eligible for dependent life insurance unless your plan also allows for coverage of other adult dependents. |
Children | A dependent life insurance policy may cover your biological children, stepchildren, legally adopted children or any child for which you have legal guardianship. Typically, insurers only offer coverage until the child reaches a certain age, which can be 26, as it is in medical insurance, or another specified age, such as when the child turns 20. Children who are older than the maximum age may continue to be considered as dependents for life insurance in certain limited situations, such as if they're mentally or physically disabled, or are a full-time student. In these cases, you'll need to provide proof of their disability, such as a physician's statement, and the child usually won't qualify as a dependent if they're married. The child would also need to be supported by you, so you would claim them as a dependent when filing taxes. |
Other adult dependents | Any other dependents, such as a domestic partner or elderly parent, may be eligible for dependent life insurance, though you'll need to refer to the terms of your benefits plan to confirm this, as it's not common. If other dependents are eligible, they'll typically need to live with you, be directly financially dependent on you or interdependent with you, and unmarried. |
Aside from the restrictions listed above, a common restriction on dependent life insurance is that it cannot be duplicated with another policy under the same group life insurance plan. For example, if both you and your husband work for the same company and he already has group life insurance as an employee, he will not be eligible for dependent life insurance. Similarly, if you had children, you or your husband could get dependent child life insurance for them. You would not be permitted to have two policies covering the same child under a single company's group life insurance plan.
Military dependent life insurance
If you are on active duty in the military or otherwise qualify for Servicemembers' Group Life Insurance (SGLI), your dependents may be eligible for Family Servicemembers' Group Life Insurance (FSGLI) (FSGLI). FSGLI is essentially term life insurance for military dependents, which means you must be either:
- An active-duty servicemember
- A member of the National Guard
- A member of the Ready Reserve of a uniformed service
Military dependent life insurance is only available to your spouse and children who are under the age of 18, full-time students, or permanently and completely disabled. You must already have a full-time SGLI to be eligible. Your family members will not be eligible if you have part-time SGLI or Veterans' Group Life Insurance (VGLI). The maximum amount of coverage per child is $10,000, and coverage is issued in $10,000 increments. Your spouse's maximum coverage is the lesser of $100,000 or the amount of SGLI coverage you have.
FSGLI dependent life insurance is free for your dependent children, but the cost to cover your spouse varies depending on his or her age and the amount of coverage purchased. Beginning at age 35, the cost of the same amount of supplemental spouse coverage will rise every five years. For example, if your wife is currently 34 years old, $100,000 of dependent life insurance would cost only $5 per month. The same amount of coverage would cost $6.50 per month in five years, when she is 39.
- If you leave the military, divorce your spouse, or terminate your own SGLI coverage, you can convert your spouse's FSGLI military dependent policy to an individual whole life insurance policy. This is only available through certain insurers that have partnered with the SGLI programme and may not include benefits that were included in the FSGLI policy, such as accidental death and dismemberment coverage.
It will, however, allow your spouse to keep their life insurance coverage without having to requalify and demonstrate proof of insurability, which can be advantageous if they are older or have been diagnosed with a condition. Individual policies cannot be converted from FSGLI coverage for dependent children.
Is dependent life insurance a taxable benefit?
If you pay for the entire coverage, dependent life insurance is not a taxable benefit from your employer. If your employer pays for some or all of your dependent life insurance, it is not a taxable benefit as long as the face value of the employer-paid coverage is less than $2,000. Employer-paid dependent life insurance for up to $2,000 per dependent is considered a de minimis fringe benefit under tax law, so the cost is not taxable to the employee.
If your employer pays for more than $2,000 in life insurance for a single dependent, the entire cost of the policy is usually considered a taxable benefit. The taxable cost of life insurance is calculated using the IRS' premium tables, which standardize the value based on the amount of coverage provided and the age of the insured. In some cases, the amount of dependent life insurance considered a fringe benefit may be greater, so if this applies to you, you should consult a tax expert.