What is voluntary term life insurance?

In your life insurance journey, you might come across the phrase “voluntary life insurance.” This phrase might strike you as kind of funny — is there such a thing as involuntary life insurance, where you are forced to be insured against your will? (Rest assured, there is not.)

No, voluntary life insurance is a type of life insurance offered through your employer. But you don’t really volunteer for it, at least not in the same way you might volunteer for a service day with your team. Yes, you choose to opt into voluntary life insurance, but you will pay for your coverage.

So does it make sense to get voluntary life insurance coverage? What are the costs and the potential drawbacks? And what is voluntary term life insurance, and does it differ from other types of insurance?

Rest easy, friend. The answers you’re looking for are below.

Contents

What is voluntary life insurance?

Let’s zoom out a bit. Life insurance, in short, is a type of insurance that pays a death benefit to your chosen beneficiaries in the event that you die during coverage. It’s a way of providing financial protection to your loved ones, so they can still afford the things you used to pay for (such as housing, food, tuition, etc.).

If you have dependents — like kids, a partner or spouse, or anyone else who depends on you and your income for their financial well-being — life insurance is probably a good idea.

Voluntary life insurance is typically offered as an employment benefit, similar to group life insurance. You either pay a regular premium, or have the premium deducted from your paycheck, in exchange for life insurance coverage. (In some cases, a small amount of group life insurance coverage might even be available for free.)

Some advantages of voluntary life insurance include the convenience — you don’t have to shop around, and you can set up payments through work. Many policies are guaranteed issue policies, meaning you can’t be denied coverage, even if you are in poor health or have a pre-existing condition. And because it’s issued to a group of employees, it’s often cheaper than a comparable individual policy.

That said, there are some drawbacks, too.

You might be limited in coverage. For example, one company may offer policies worth 100% to 200% of your annual compensation. Another might cap it between $50,000 and $250,000 in coverage. That might not be enough life insurance coverage for most people.

You should also make sure your policy is portable. That is, if you leave your job — for another, higher-paying job, or because you are laid off — your policy will continue, leaving your life insurance coverage in place. (You might need to complete paperwork within one or two months of your severance.) After all, the most recent statistics suggest the average American will hold roughly 12 jobs during their lifetime, so you want to make sure you can take your policy with you.

Which brings us to voluntary term life insurance. Simply put, this is life insurance that lasts for a set number of years — the “term,” if you will. (And you will.)

This differs from voluntary whole life insurance, a type of voluntary life insurance that is designed to last your entire life. Sometimes, whole life policies also accumulate cash value, meaning you can borrow against the value of your policy. Sounds great, right? But there’s a big drawback: These policies often cost a lot more in premiums.

Voluntary term life insurance is typically more affordable, and the terms last for 10, 20 or even 30 years. If the cost is affordable to your family (or if it’s free), it doesn’t hurt to have that insurance in place.

Voluntary term life insurance vs regular term life insurance

As with voluntary life insurance, there are two primary types of life insurance on the open market. Whole life insurance, coverage designed to last your whole life. And term life insurance, which lasts a set number of years, typically between 10 and 30.

Because whole life insurance coverage includes the years when you are older and likely to be in poorer health, whole life insurance policies are often considerably more expensive than term life insurance.

In addition, because you typically have a lower income in those later years — and typically fewer costs, as you’ll typically have paid off a mortgage and any kids will hopefully be financially independent — your death is less likely to cause financial hardship for your family.

For example, for a $250,000 whole life insurance policy from State Farm, a 35-year-old man in excellent health would pay an estimated $284 per month.

Term life insurance, however, lasts only for the years that you need it. You can buy a policy of 10, 15, 20, 25 or even 30 years. And at Haven Life, you can buy a policy worth up to $3 million (or as little as $250,000). And you can do so while paying a low monthly premium that stays the same throughout the life of your policy.

Not sure how much coverage you need, or how long you’ll need it? A common rule of thumb is to buy a term life insurance policy worth 5 to 10 times your annual salary.

And in general, you want to buy a term length that lasts until those aforementioned milestones: Until you pay off your mortgage, your children achieve financial independence, and/ or you retire. Essentially, until you no longer have large debts or financial dependents. (You can also use our helpful life insurance calculator.)

Remember when we told you a whole life policy can cost nearly $300 a month? Keep that in mind as you peruse some example rates of what people in excellent health might pay per month for Haven Term.

AgeGenderPolicy lengthCoverage amountMonthly Premium25Male30 years$250,000$17.4925Female30 years$400,000$19.5535Male20 years$500,000$20.7235Female20 years$600,000$19.7545Male15 years$750,000$50.6245Female15 years$1,000,000$49.40Estimates based on pricing for eligible Haven Term applicants in excellent health. Pricing differences will vary based on ages, health status, coverage amount and term length. These prices do not reflect the rates for applicants in DE, FL, ND, NY and SD.

Find the right life insurance for you

Whatever path you choose, life insurance offers the peace of mind that comes with knowing that, if something happens to you, your loved ones are financially protected.

For many people, term life insurance is a good idea, an affordable option for that coveted peace of mind. Start your journey by getting a free online life insurance quote today.

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus

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What is voluntary term life insurance?

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What is voluntary life insurance?