Voluntary life insurance
Voluntary life insurance is a type of group life insurance that some employers offer as an optional benefit. Since it’s a benefit usually available to a large number of employees, life insurance companies typically offer it at a group rate that is cheaper than buying coverage individually. While everyone may not need voluntary life insurance coverage, it might be beneficial to those who only need a small amount of coverage, who are in poor health or who have already been turned down by another life insurance company.
Key takeways
- Voluntary life insurance is an optional group life insurance policy offered by select employers, usually at a discounted rate.
- It may be a beneficial option for people with chronic health conditions or those who have been rejected by private life insurance companies.
- Most employers offer voluntary term life insurance rather than voluntary whole life insurance.
- The coverage may be portable if you leave your employer, depending on the policy.
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Whole life insurance combines life insurance with an investment component.
- Coverage for life
- Tax-deferred savings benefit if premiums are paid
- 3 variations of permanent insurance: whole life, universal life and variable life include investment component
Term life insurance is precisely what the name implies: an insurance policy that is good for a specific term of time.
- Fixed premium over term
- No savings benefits
- Outliving policy or policy cancellation results in no money back
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What is voluntary life insurance?
Voluntary life insurance is an optional group life insurance policy offered by select employers. Since employers sponsor voluntary life insurance policies, the premiums are usually lower than those of an individual term policy and may even be covered entirely by your employer. Like other forms of life insurance, voluntary life insurance pays out a death benefit to the employee’s named beneficiaries, should the employee pass away. Even if your employer pays part or all of the premium, you still get to choose your beneficiary.
Who needs voluntary life insurance?
Voluntary life insurance might be appealing to applicants who have trouble qualifying for a private policy, such as those with chronic health conditions like heart disease or diabetes. That is because voluntary life insurance applicants do not generally have to undergo a medical exam in order to open a policy. This fact may allow applicants who were previously rejected by private life insurance providers to gain coverage.
Voluntary life insurance may also be useful for someone who already has an individual life insurance policy but wants additional coverage for added financial security. For example, someone who qualified to buy a $100,000 indexed universal life policy before their health problems began may want to supplement their current death benefit by participating in their employer’s voluntary life insurance program for a relatively low premium. That said, the death benefits on voluntary life insurance policies tend to be lower than those available for private life insurance policies.
How much voluntary life insurance do you need?
To determine the amount of life insurance you need, it can be helpful to consider the financial circumstances of your dependents. In the event that you pass away suddenly, you’ll want to ensure that your loved ones are adequately taken care of. For example, if you have outstanding mortgage payments or are putting children through college, it might be a good idea to opt into your employer’s voluntary life insurance offering.
Most employers’ voluntary life insurance plans allow employees to purchase coverage in $10,000 increments or as multiples of their salary. However, be sure to check with your company’s human resources department for exact figures. It can also be helpful to speak with a licensed insurance agent to decide how much life insurance coverage is right for you and your family.
Voluntary group life insurance death benefits are generally lower than what you’d find in the private marketplace, so your employer may also offer supplemental life insurance if you’re looking to increase your coverage levels. Like voluntary life insurance, the supplemental life insurance offered by your employer will generally be available at a discounted group rate.
How much does voluntary life insurance cost?
One of the biggest perks of voluntary life insurance is that it typically costs less than a private policy. This could be especially helpful for people with chronic health conditions, as they often face higher life insurance premiums in the private marketplace. Choosing a voluntary life insurance policy offered by an employer is likely a much cheaper option than purchasing guaranteed issue life insurance independently.
In some instances, an employer may offer voluntary life insurance to their employees at no cost. However, if you have to pay a premium for your voluntary life insurance policy, it will usually be deducted automatically from your paycheck.
How to get voluntary life insurance
In order to obtain voluntary life insurance, you must first be employed by a company that offers this benefit or be a member of an affiliated organization, such as a credit union.
Enrollment
If your employer offers voluntary life insurance, you can typically enroll in this program as soon as you are hired or soon after that, such as after a period of 90 days. In some cases, you will need to renew this benefit during your company’s open benefits enrollment period.
You may be able to purchase additional coverage for yourself or a family member, in which case you would likely have to fill out additional paperwork, agree to additional fees and may even be subject to a medical exam or questionnaire. During your enrollment period, you might get the option to decide whether or not you want additional life insurance riders on your policy, as well.
Portability
If you leave your employer, your voluntary life coverage may be portable, depending on the terms of coverage that your employer offered. You might have the option of converting your term coverage into permanent life insurance that you can keep regardless of where you work. If you are planning to change employers, you may want to check with your human resources department to nail down your policy’s portability and conversion option details.
Frequently asked questions
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The best life insurance company depends on your individual preferences, personal characteristics and policy needs. Choosing the right option for you can be daunting, so you may want to talk with an independent insurance agent about your needs. A life insurance agent can help point you to the top companies that offer the policy types you want.
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The voluntary life insurance offered by your employer will generally have a low death benefit. However, if you do not have any financial dependents, it may be a suitable amount of coverage. Your employer may also offer supplemental life insurance available at a discounted group rate, which might be worth looking into if you’re interested in increasing the death benefit. However, adding supplemental coverage could possibly require a medical questionnaire.
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Your employer should be able to tell you whether you have the option to take your life insurance policy with you after you leave. Contacting your HR department or your life insurance company representative is likely the best way to find out specifics.
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You may be able to drop voluntary life insurance at any time, but it is best to speak with your employer or the human resources department to make sure. Some life insurers allow you to drop voluntary benefits at any time, while others only allow changes during open enrollment for benefits, which typically happens once per year.
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Yes, voluntary life insurance covers accidental death. However, accidental death and dismemberment (AD&D) insurance might also be an available benefit through your employer. This type of policy may provide additional coverage if the insured dies an accidental death or loses a body part, such as an arm, leg or eye. Some voluntary life insurance policies offer an AD&D rider, which may be cheaper than a separate AD&D policy.
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