What Is Voluntary Life Insurance? Do I Need It?
What Is Voluntary Life Insurance?
Many employers offer their employees optional life insurance plans. Voluntary life insurance is supplemental coverage beyond group life insurance.
Because it’s available to all employees regardless of health, you will pay group rates for voluntary life insurance. Group rates are only reasonable if you have health issues or other risk factors that would make private life insurance more expensive. In addition, voluntary life insurance offers limited benefits, so it isn’t the best option for everyone.
Voluntary Life Insurance vs Basic Group Life Insurance: Are They Different?
While both are types of life insurance offered through your employer, basic group life insurance and voluntary life plans have many differences.
Group vs. Voluntary Life Insurance:
Group life insurance coverage is typically an amount equal to your annual salary.
Voluntary life insurance is optional buy-up coverage. You can buy 3-5 times your salary without providing proof of insurability and up to 8 times if you’re in good health.
Your employer pays for group life insurance premiums.
Voluntary life insurance premiums are group rates that you’re responsible for.
Both group and voluntary life coverage end if you leave your job.
How Does Voluntary Life Insurance Work?
Employees can buy voluntary life insurance coverage during their open enrollment period.
Many companies offer employees two levels of voluntary life insurance: guaranteed issue and simplified issue.
You can buy guaranteed issue without answering any medical questions. Coverage amounts range from 3-5 times your annual salary but can’t exceed a set maximum.
You can also buy simplified issue but need to provide evidence of insurability. You’ll have to answer a short medical questionnaire to prove you’re in good health. Coverage amounts range from 8-10 times your annual salary but can’t exceed a set maximum.
Types of Voluntary Life Insurance
Employers offer buy-up voluntary coverage, which is usually voluntary term life insurance. Voluntary whole life insurance is less common.
Voluntary Term Life
Voluntary term life insurance is basic financial protection for your beneficiaries. Term life insurance is not designed to last a lifetime, only a specific period. Your beneficiaries receive a death benefit check if you die during the term.
Every year during open enrollment, you need to re-enroll in the coverage. Voluntary term life insurance premiums are based on group rates by age per $1,000 of coverage. If you move into a new age group, your rates will increase from the prior year.
Voluntary Whole Life
Some employers will offer permanent life insurance like voluntary whole life or universal life. These policies are designed to last your entire lifetime and accumulate cash value.
Permanent voluntary life insurance policies will be much more expensive than term life insurance. But because of the permanent nature of voluntary whole life and universal life insurance, you’re likely able to keep the policy if you change jobs.
Voluntary Accidental Death and Dismemberment Insurance (AD&D)
Many employers provide a small amount of accidental death and dismemberment insurance along with your basic group life insurance. But employees often have the option to buy additional voluntary AD&D insurance as well.
AD&D insurance has two components:
It pays a benefit if you survive an accident and wind up with serious injuries
It pays your beneficiaries additional benefits on top of your group life insurance benefits if you die from an accident
Accidental death and dismemberment insurance is cheap since it only pays out in severe injury or accidental death cases. AD&D insurance should supplement traditional life insurance. It shouldn’t be your sole insurance plan.
Use our term life insurance calculator to quickly and easily determine how much life insurance you really need.
