What is Dependent Life Insurance? Who Qualifies as a Dependent for Insurance?
Life insurance policyholders can typically buy coverage for a spouse or child by adding dependent life insurance coverage to an existing policy.
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Dependent coverage options vary by company and plan, but the amount of coverage available is typically significantly lower for dependent coverage than for an individual policy. Coverage for dependents can be added to both individual and group life insurance policies, but voluntary dependent life insurance usually refers to coverage through an employer.
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How does voluntary dependent life insurance work?
Voluntary dependent life insurance, also called dependent group life insurance, is often available as part of a benefits plan through employers. Dependent insurance can cover your spouse, children and other eligible dependents, according to the plan's rules. The employee is automatically designated as the beneficiary, so if a covered dependent dies, you would get the policy's face value as the death benefit.
Depending on when you buy dependent coverage and the amount you want to purchase, you may have to provide evidence of insurability for your dependents. This usually just requires answering basic health and medical questions about your family on forms, so the company can evaluate their risk.
Coverage options and cost of dependent life insurance
Dependent coverage is generally offered in increments of a dollar amount, such as $2,000 or $10,000. So, for instance, a plan might let you purchase up to $10,000 of dependent insurance per child, in increments of $2,000. That means you can purchase either $2,000, $4,000, $6,000, $8,000 or $10,000 of coverage per child.
Every plan specifies the maximum amount of coverage per eligible dependent.(The limits are usually higher for spouses than for children.) Your dependent coverage options may also be limited by the amount of group coverage you got for yourself. That maximum coverage is often limited to between 50% and 100% of your own supplemental coverage.
You can buy dependent life insurance just for your spouse, just for your children or for all eligible dependents. But most plans don't allow you to specify coverage for a single child. This doesn't impact the cost, though. All children are usually covered for the same rate as it would cost to cover a single child: The dollar amount is determined only by the amount of coverage.
Supplemental spouse life insurance tends to cost more, because adults are at higher risk of passing away. Rates vary by the amount of coverage, as well as your spouse's age.
For example, the monthly premium for your children's coverage may be consistently $0.15 per $1,000 of coverage, meaning $10,000 of coverage would cost $1.50 per month. Meanwhile, your spouse's pricing could be $0.60 per $1,000 of coverage each month, with price increases every five years as they age.
Premiums for dependent coverage, as well as any voluntary life insurance you got for yourself, are automatically withheld from your paycheck after taxes.
Dependent coverage after you leave an employer
Child life insurance policies typically cannot be converted. When a child's eligibility ends, they will simply no longer have life insurance. Dependent life insurance policies for spouses, on the other hand, often come with a conversion option. It can be converted if:
- You retire, quit or are terminated from your position
- You divorce your spouse
The option allows your spouse to keep life insurance coverage without proving insurability. Your spouse would just convert the dependent policy to an individual life insurance policy. Insurance company options and policy types will likely be limited. For instance, the only option may be to convert to a permanent life insurance policy, such as whole or universal life insurance.
Some employers allow employees to continue a dependent life insurance policy past their date of retirement if they meet age or tenure requirements. However, this isn't common, so ask your employer whether your family would qualify.
Who qualifies as a dependent for life insurance?
To be eligible for dependent coverage, the person must first qualify as a dependent, according to the definitions in your group life insurance plan. Most plans allow you to add dependent life insurance for your children and spouse, if they meet requirements. For example, similar to health insurance, in many supplementary life insurance plans, children are only considered dependents until age 26. Some group plans allow you to buy life insurance for other adult dependents, but this is less common.
Who can qualify | Common restrictions |
|---|---|
| Spouse | The definition of a spouse for supplemental life insurance usually includes anyone who is recognized by state law as your husband or wife. It can also include a common-law spouse if the marriage is legally recognized by your jurisdiction. A domestic partner may not be eligible for dependent life insurance, unless your plan also allows for coverage of other adult dependents. |
| Children | Biological children, stepchildren and legally adopted children may be covered. This also includes any child in your legal guardianship. Typically, insurers only offer coverage until the child reaches a certain age. This can be 26, as it is in medical insurance, or another age.
Children who are older than the maximum age may be considered dependents in limited situations, such as if they're mentally or physically disabled or 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 cannot be married. You would also need to be supporting your child and claiming them as a dependent on your taxes. |
| Other adult dependents | Other dependents, such as a domestic partner or elderly parent, may be eligible. But you'll need to read the terms of your plan to confirm this, because it's uncommon. Other eligible dependents typically need to live with you, be unmarried, and be directly financially dependent on you or interdependent with you. |
Another common restriction on dependent life insurance is that it can't duplicate another policy under the same group life insurance plan. For example, if you and your husband work at the same company, and he has group life insurance as an employee, he would not qualify for dependent life insurance as well. Similarly, either you or your husband could purchase dependent child life insurance. You would not be allowed to have two policies from a single company that covered the same child.
Military dependent life insurance
If you're on active duty in the military or otherwise qualify for Servicemembers Group Life Insurance (SGLI), your dependents may qualify for coverage through Family Servicemembers Group Life Insurance (FSGLI). FSGLI is essentially term life insurance for dependents of military members, meaning you must be either:
- On active duty
- A member of the National Guard
- A member of the Ready Reserve of a uniformed service
Military dependent life insurance is limited to your spouse and children who are either under 18, full-time students or permanently and totally disabled. To qualify, you must already have full-time SGLI. If you have part-time SGLI or Veterans Group Life Insurance (VGLI), your family members will not qualify. Coverage is issued in increments of $10,000, which is also the maximum amount per child. The maximum coverage for your spouse is the lesser of $100,000 or the amount of your SGLI coverage.
FSGLI is free for your dependent children. The cost to cover your spouse varies by their age and the amount of coverage. Beginning at age 35, the cost for the same amount of supplemental spouse coverage will increase every five years. For instance, if your wife is currently 34, the monthly cost of $100,000 of dependent life insurance might be $4.50. It might increase next year when she turns 35 to $5.30 per month, then increase again to $8.00 when she turns 40.
However, it will allow your spouse to continue their life insurance coverage without requalifying and proving insurability, which can be beneficial if they're older or have been diagnosed with a condition. FSGLI for children cannot be converted to an individual policy.
Is dependent life insurance a taxable benefit?
Dependent life insurance is not a taxable benefit from your employer if you pay for all of the coverage. If your employer pays for part or all of the dependent life insurance coverage, it's also not a taxable benefit if the face value of the coverage is less than $2,000. Tax law considers up to $2,000 of employer-paid life insurance per dependent to be a low-value perk, so it isn't taxable for the employee.
However, if your employer pays for over $2,000 of life insurance for any single dependent, the entire cost of the policy is typically a taxable benefit. The taxable cost of the life insurance is determined by the IRS's premium tables, which standardize the value by amount of coverage and age of the person insured. In some cases, the amount of dependent life insurance considered to be a fringe benefit may be greater, so you should consult a tax expert if this applies to you.
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